A Close Call and an Uncertain Future: An assessment of the past, present, and next steps for Philadelphia’s largest refinery

Brian Abernathy and Adam Thiel November 2019

City of Philadelphia 1 Message From The Co-Chairs

In the early morning hours of June 21, 2019, Philadelphia was rocked awake by a series of explosions at the large refinery site in South Philadelphia. Immediately afterward, as the scope of the incident became more widely known, many residents began to ask questions and express concerns over what happens beyond the refinery’s fence line, what impacts the refinery has on public health and safety, and what will happen in the future – to the refinery, to the site, and for themselves.

For many reasons, the case of the Philadelphia Energy Solutions (PES) Refinery is not a typical example of a large employer closing its doors. The refinery has been a significant part of Philadelphia’s economic landscape for more than 150 years, yet it remains a controversial one. Unlike most employers, the refinery sits at the intersection of many different public and private interests – many of which are inherently in conflict with one another – and the very presence of a large oil refinery in our City raises a series of valid questions:

• Is the existing refinery safe? What are the dangers and how • How is the pollution from the site impacting communities? What are residents being protected? is the relationship between the refinery and those communities? • What will happen to the refinery workers? How can the • How does the refinery contribute to climate change or fit existing jobs be saved or replaced? into the long-term future of energy? • What is the economic impact to the City, to the state, and to • How economically sustainable is the refinery in the long term? the region of the refinery closing? • How can/should the 1,300-acre site be used in the future? • Does a refinery, and all of the inherent risks associated with • What are the current and future environmental dangers and one, belong in the middle of such a densely populated area? risks on the site and how are they going to be addressed?

Due to both the very prominent public safety concerns that were heightened as a result of the incident on June 21st, as well as the intersection of so many different interests, having a public conversation and process to sort through these issues was of paramount importance. Mayor Kenney created a Refinery Advisory Group to organize a process that allowed City leaders to learn about the refinery from the points of view of all stakeholders, including from those most directly impacted by the refinery – nearby residents and PES employees. The Advisory Group process provided a way to make sure we learned as much as possible, and created the opportunity for concerned residents and interests to share their thoughts and concerns directly with the City.

This report provides a summary of the information, perspectives, and concerns that we heard through the Advisory Group process. It also provides factual context behind the history of the refinery, its positive and negative impacts, and clarifies the role of City government in defining the future of the site. The report also responds to some of the common questions that emerged throughout the Advisory Group process. Lastly, the report contains recommendations around a set of values for the future use of the site and specific operational recommendations for the City to implement as the future for the refinery site becomes clearer – whatever that future may be.

We have been clear throughout this process that we do not expect every stakeholder or interest to be fully satisfied with this process or this report. Finding consensus around how the site should be used in the future would be challenging in the most ideal circumstances. While the City has no direct control over this privately-owned site, which is in the midst of a bankruptcy proceeding, and we cannot dictate its future, we hope to influence the future of PES. We have attempted to conduct this process and write this report with clear eyes, active listening, and open minds so the City is best prepared for supporting and encouraging a future for the site that is cleaner, safer, and better for Philadelphians than it ever has been in the past.

Sincerely,

Brian Abernathy Adam Thiel Managing Director Fire Commissioner and Director of Emergency Management

2 Table of Contents ABOUT THIS

4 About the Refinery Advisory Group REPORT

This report is authored by the two co-chairs and based on 7 The Philadelphia Refinery many perspectives shared through the Advisory Group process. The report is intended to provide the public, other City officials, and other stakeholders with an overview of the issues surrounding the refinery and the information gathered Benefits of Refinery 13 through the work of the Refinery Advisory Group. The report concludes with a series of values statements intended to define the suggested conditions under which City officials 17 Costs of Refinery should evaluate its approach to proposals for how the site may be used in the future. Though this report contains several recommendations for how City operations should be 24 The Incident of June 21st evaluated and strengthened in the future, as well as several recommended attributes and features that future owners of the site should consider implementing, it does not attempt 27 Current Status to make any specific recommendation for how this privately- owned site should – or should not – be used in the future.

This report was drafted and reviewed by city staff and 30 Potential Reuses many of the cited reference materials are available at www.phila.gov/refinery. The report does not reflect the views of the Advisory Group as a whole or its individual 35 Next Steps Moving Forward members.

42 Conclusions

43 Acknowledgements

44 Sources

3 process – to bring forth subject matter experts and stakeholders who could present to City officials and the public on various issues About The that the City of Philadelphia should consider as the future of the Refinery Advisory refinery site comes into clearer focus. This report represents a summary of the information that the City has learned through this process and outlines the values the City Group will apply to evaluate and respond to proposals for the future use of the refinery. The report also contains several recommendations Introduction and Background from the perspective of the co-chairs for steps the City should take to improve its operations in the future. On Friday, June 21st, 2019, at approximately 4:00 am, a major The report draws heavily upon the information that members explosion rocked the Girard Point facility of the PES refinery of the Advisory Group organized and presented to the City. complex in South Philadelphia. The explosion was heard and felt Though a draft of the report was shared with the Advisory Group throughout the surrounding communities, and dramatic video prior to its public release, this report represents the views of the footage of the incident was featured on national news – leading City and not the views of the Advisory Group as a whole, or its to a heightened level of public interest and concern regarding individual members. the refinery.

Thanks to the efforts of the PES fire brigade, the quick actions of the highly trained staff on duty at the refinery, and the Philadelphia Fire Department, the incident and its immediate impacts were contained on the refinery property without serious injuries to refinery workers, first responders, or community MISSION members. However, the incident raised serious questions and concerns in the minds of many regarding the refinery – The Refinery Advisory Group assembled a group of particularly since another smaller and unrelated fire occurred at stakeholders with diversity of experience, knowledge, and another portion of the refinery several weeks prior to June 21st. perspectives on the PES refinery site and its operations. The Advisory Group focused on: The day of the explosion, Mayor James F. Kenney called upon • Providing data on how the announced potential Managing Director Brian Abernathy and Fire Commissioner and closure of the PES facility will impact Philadelphia with Director of Emergency Management Adam Thiel to convene respect to the economy, environment, and public a working group to evaluate the cause of and response to the health and safety. incident with the intention of making recommendations about what could be improved moving forward. • Providing input regarding the potential reactivation or reuse of the site, as well as understanding the Several days later, on June 26th, the leadership of PES obstacles, limitations, and role of the City in the announced their intention to cease operations at the process. refinery and market the complex for a sale. Following that • Sharing ideas regarding uses for the site that are both announcement, City leadership refocused the working group economically feasible and positive for the City. on the future of the site. The Refinery Advisory Group was • Organizing, through a committee structure, feedback comprised of representatives from numerous constituencies from members of different constituencies and the and stakeholder groups affected by the refinery. Members were public in an effort to better inform City officials and chosen to represent various stakeholder groups impacted by members of the Advisory Group. the refinery closure – business, community, labor, academic and environmental experts, and government officials – and conflicting points of view were encouraged.

Unlike many task forces or working groups organized by government, the charge of the Refinery Advisory Group was not to make recommendations or policy decisions as a group. Rather, the members were tasked with organizing the information-gathering

4 Process

The Advisory Group process was designed to be open, transparent, and informative. A series of public meetings were organized based on stakeholder group to encourage an orderly dialogue that would sort through the different perspectives around the refinery and its related issues. All meetings were held in a community-based location near the refinery complex (Preparatory Charter School – 25th and McKean Streets) after normal working hours. The meeting location was climate controlled, ADA accessible, reachable by transit or car, and could accommodate approximately 300 people.

A total of six meetings were held:

August 6 August 21 September 9 Introductory Kick-Off Meeting Labor Committee Business Committee

This meeting provided the public This meeting was focused on This meeting focused on hearing from the perspectives of with a factual overview of the PES hearing from the members of the business community regarding the impact of the PES refinery, the incident on June 21st, the PES workforce, as well as refinery on the regional economy, as well as what types of the City’s regulatory authority, and from others with experience ideas that are likely to be generated for the future of the site an introduction to the Advisory and perspectives on labor and based on market conditions and the infrastructure present on Group structure and process. Public employment issues. the site. Public comments were received following organized comments were received at the presentations. conclusion of the presentations.

AUGUST SEPTEMBER

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

August 20 August 27 September 25 Community Committee Academic & Environmental Open House Committee This meeting focused on hearing from The final meeting was structured members of the community about the This meeting focused on hearing to share what the Advisory Group refinery. The event was structured as from the perspectives of the and City officials had heard through small, facilitated group discussions academic and environmental this process. The intent was to around a common set of questions. community around the PES refinery create a two-way communication City staff facilitated the conversations and related issues. The meeting and provide another opportunity and documented what was said, with also had a presentation from the for people to weigh in with any notes of those conversations later PA Department of Environmental final comments. Themes were posted online. In addition, a video Protection explaining the Act 2 printed on large boards that were story booth was set up to provide remediation process. Environmental placed throughout the room with members of the public with an scientists and activists were facilitators, and members of the opportunity to record brief comments encouraged to both make public were welcomed to share about their thoughts and feelings presentations in person at the additional thoughts, ask questions, toward the refinery and its future in a meeting, and to submit comments and come and go as they pleased. different format. that could be posted online. Public comments were received following organized presentations.

Public participation was encouraged and permitted at every meeting, and members of the public had multiple different avenues to participate. Some meetings permitted people to sign up and speak at a microphone in advance, and other meetings permitted people to speak at the end without pre-registration. People were also encouraged to submit written comments to the Advisory Group at [email protected].

Meeting materials, including copies of presentations and written testimony, were posted online at www.phila.gov/refinery for any members of the public to access at any time. Most meetings were also filmed by the City and the videos were put online.

5 • The City should seize the property//The City should not What We’ve Heard seize the property • The private sector should determine what happens at the Extensive comments were shared through the Advisory Group site//The community should determine what happens at process and its six public meetings. More than 115 comments the site. were received via story stations, public testimonies, and written • Portions of the site should be made available for public feedback – plus extensive written testimony and remarks that use//The site should remain primarily a center for were made available on the website. employment/private use.

Overall, most feedback fell into these topics: Despite these different opinions, members of the public, including • Health and safety of the surrounding community and near neighbors and refinery workers, also seemed to agree on requests to guide the future of the refinery site: workers several

• Loss of jobs and economic impact • Make equity central to use, development, hiring, and • Climate change, fossil fuels, and environmental sustainability community engagement. • The ideal future use(s) of the site • Companies that caused pollution should pay for all damages and cleanup. • Pollution and environmental conditions and cleanup • New site management should: • The refinery’s impact on, and relationship with, the surrounding community – Work to repair trust between workers and management • Outreach and communications between the community, – Improve working conditions and invest in modern and refinery, and City updated operations, including pollution controls. – Work cooperatively with unions and the workforce, While there were many different perspectives and points of view including by taking employee suggestions on how to shared, most people seemed to agree on several things: improve/modify/adjust operations. – Have a local hiring requirement from surrounding • People should be kept safe and healthy. This includes the community. health of the community and the workers. – Hold regular inspections and make the results publicly • There should be high-quality jobs and job training available available. for workers and community members. – Incorporate more environmentally friendly operations. • The site should be cleaned up and there should be ongoing monitoring. • The City should consider: • Residents and taxpayers should not bear the cost of – Being more involved in monitoring any future use remediation and cleanup. proposals and operations at the site • There should be better communication between – Making sure a new owner is better capitalized and management and workers, the land owner and the invested in long term success community, the City and the community, and between workers and residents. – Paying for security and testing if the site becomes vacant for an extended period of time.

People also had differing opinions on what should – Exploring re-zoning the land for another use(s) happen with the site: – Implementing stronger environmental regulations and compliance monitoring. • The site should never be a refinery again//The site should – Banning or more strictly regulating certain hazardous absolutely be a refinery again. materials. • The refinery is safe//The refinery is toxic and dangerous • The site should have homes on it//The site should never have people living on it.

6 Background and History

Since the dawn of the industry in the mid-1800s, petroleum has been a significant part of Philadelphia’s industrial economy. As the petroleum industry rapidly grew in the 1860s and subsequent decades, Philadelphia developed into one of the most significant early refining and storage hubs due to its location between the oil fields of Western Pennsylvania and consumer markets – both domestic and abroad. In the mid- 19th century, petroleum storage and processing facilities were scattered throughout the industrial sections of Philadelphia. As the contamination risks and fire dangers of these operations quickly became evident, petroleum operations consolidated to more isolated locations in the southern parts of the City, away from residents and drinking water supplies and near railroads and wharves.1

The refinery site on the lower Schuylkill River was first used for petroleum-related uses as far back as 1866, when the Atlantic Petroleum Storage Company built a complex to store and transport petroleum and its byproducts by taking advantage of the proximity of railroads and wharves. At the time, the The Philadelphia surrounding neighborhoods were sparsely developed and much of the site was farmland or marshes along the tidal Schuylkill.

Refinery Shortly thereafter, refining operations began on the site, and Atlantic Refining quickly grew to become Philadelphia’s largest employer by 1870. At this time, the most significant product made was lamp fuel since there were no other major consumer uses for the other byproducts from the refining process. The facility quickly became a leader in its field – by 1891, 50% of the world’s lighting fuel and 35% of all U.S. petroleum exports came from the 360-acre refinery at Point Breeze.2

In the early part of the 20th century, additional petroleum activities developed in the area in response to growing demands Since the dawn of the for new products like gasoline and aviation fuel, and by the industry in the mid- 1920s a terminal and second refinery were built nearby at Girard Point by Gulf Oil Company. These two neighboring refineries – 1800s, petroleum has Atlantic’s Point Breeze refinery and Gulf Oil’s Girard Point refinery – gradually expanded, increased their capacity, and changed been a significant part of corporate owners several times.

Philadelphia’s industrial While the refinery site continued to expand, so did the surrounding neighborhoods. The farms and marshes that once economy. surrounded the refinery site were developed with homes, streets, and highways. The Schuylkill Expressway and Platt Bridge were constructed through the area after World War II, transforming the area from an isolated industrial pocket to a Note: Throughout this report, references to “Philadelphia Energy Solutions” or “PES” are used to refer to issues specific to that corporate entity or refinery owner. For more general major transportation crossroads. Public housing developments references to the refinery complex, the term “Philadelphia refinery” is used.

7 The Philadelphia Refinery were built near the refinery site, including directly across the highway from portions of it, by the Philadelphia Housing Authority and the federal government. Today, the refinery – which long predated its neighbors – is situated in the midst of a sprawling, densely populated area that is home to more than 113,000 people within 1 mile of the property’s fence line.3

Sunoco, which was a Philadelphia-headquartered oil company with deep roots in the region, purchased the Point Breeze refinery complex in 1988 and the Girard Point refinery complex in 1994, and operated the two refineries as one complex (the Philadelphia refinery) to produce mainly transportation fuels such as gasoline and diesel fuel, as well as heating fuels.4 Sunoco, in Crude Oils and Oil turn, distributed and sold these fuels through its own network of pipelines and retail gas stations. By jointly operating these Refineries refineries as one complex, Sunoco positioned its Philadelphia refinery to be the largest on the East Coast, with a capacity of 335,000 barrels per day. Crude Oil refers to the oil that is pumped from the ground before it is turned into refined products used by consumers. Sunoco also connected the Philadelphia refinery to its other regional refineries – its original refinery in Marcus Hook, PA and Oil refineriesare industrial plants that transform crude oil its refinery in Eagle Point, NJ – by pipeline and configured the into a range of useful products, such as gasoline, diesel fuel, Point Breeze refinery to process the same light-sweet crude heating oils, asphalt, and other chemicals. oil that its other regional refineries processed. Sunoco also built pipelines to connect its regional refineries to a crude oil There are many different types of crude oils depending on importing terminal along the Delaware River near Fort Mifflin and the geology where the oil comes from. Crude oil is usually the Philadelphia International Airport.5 described by its density and its sulfur content. Crude

oil can be “heavy” or “light” depending on its density, and As time went on, Sunoco faced difficulty with maintaining “sour” or “sweet” depending on its sulfur content. profitability in its refinery operations. While Sunoco made regular upgrades to equipment and technology, the Generally, lighter and sweeter crude oils (less dense, lower refinery’s fundamental configuration remained comparatively sulfur) are more expensive but easier to extract, transport, unsophisticated and did not see major changes to allow it to and refine into consumer products like gasoline and other process the cheaper, heavier crude oils that were entering the fuels. Heavy, sour crude oils are typically less expensive global market or deploy more expensive and complicated but are more difficult to extract, transport, and refine into hydrocracking capabilities. As a result, the refinery had to rely consumer products. on some of the world’s most expensive types of crude oils, which were primarily shipped to Philadelphia from West Africa, Refineries are built to process specific types of crude oils. Venezuela, and other locations abroad. This put the refinery at The Philadelphia refinery complex is built to process light, a competitive disadvantage compared to refineries that had the sweet crude oil and turn that oil primarily into motor fuels. types of technology in place that would allow them to process less expensive, heavier crude oils or the ability to turn multiple types of crude oils into a wider range of products.

4In addition to gasoline, diesel, and heating fuels, the refinery produces and markets jet fuels, kerosene, propane, propylene, butane, cumene, and sulfur.

8 The Philadelphia Refinery By 2009, Sunoco announced some significant changes to its Philadelphia Energy business model and regional refining activities. In a time of softening demand and increased competition, the company Solutions Equity closed its refinery in Eagle Point, NJ in 2010 to increase utilization of its other two refineries. By 2011, Sunoco announced that it would exit the refining business entirely and instead focus on

Ownership logistics and retail, which were more profitable activities. At the (as of January 2018 - prior to first bankruptcy): time, Sunoco claimed that its northeast refinery operations cost the company $772 million between 2009 and 2011 and that Equity Holder- Percentage of Equity Held the company was unable to justify making the expensive capital investments needed to position the Philadelphia and Marcus Hook refineries to be more competitive and sustainable in the Carlyle Group future. Sunoco announced its intention to shut down its last two refineries at Philadelphia and Marcus Hook by July 2012 if a new 65.04% buyer could not be found. Sunoco was ultimately purchased in April 2012 by Energy Transfer Partners (ETP).6

Sunoco/ETP The Marcus Hook facility was closed as a refinery and (d.b.a. PES Equity repurposed, using its strategic pipeline connections, geologic Holdings) storage caverns, and location on the Delaware River to serve as a hub for storing and transporting natural gas liquids. Meanwhile, 32.52% around July 2012, an entity called Philadelphia Energy Solutions (PES) was created to purchase the Philadelphia refinery and continue its operations. Current and former PES senior The PES Era management A privately held company, Philadelphia Energy Solutions (PES) 2.44% was created as a joint venture between Sunoco and the Carlyle Group, a large private equity firm. As part of the joint venture, Philadelphia Energy Solutions Operations: Sunoco contributed its refinery assets and Carlyle contributed $175 million in capital. 335,000 barrel per day refining capacity; largest refinery on East Coast and 11th largest in U.S. The creation of PES and its plan to continue operating the Philadelphia refinery received significant political backing at Typically produced: all levels of government, and public subsidies were provided to assist the company with modernizing its operations Gasoline Distillate (diesel,fuel oils) and preserving the existing jobs. The Commonwealth of Pennsylvania provided $15 million over three years for refinery 45% 40% cracker equipment upgrades and a $10 million grant for rail car unloading infrastructure to expand the refinery’s ability to receive crude oil by train. The Commonwealth also provided Low-value products High-value tax relief through Keystone Opportunity Zone designations, the (residual fuel, liquid petrochemicals opportunity for tax exempt bonds, and a consent decree with petroleum gas, etc.) the PA Department of Environmental Protection (PA DEP) to 3% address outstanding air pollution violations at Sunoco’s Marcus 12% Hook refinery. As part of the transaction, PES was also protected from liability from historical environmental contamination at the Direct employees site, and the liability for addressing that contamination remains approximately with Sunoco.7 1,100

Source: Simeone 46 9 The Philadelphia Refinery PES operated the Philadelphia refinery complex as an While Bakken crude (priced on the WTI exchange) was trading independent “merchant refinery” - meaning it bought crude at a discount to imported oil (priced on the Brent exchange), oil and sold refined products on the market, rather than for PES did well financially – reporting $156 million in positive net affiliated businesses. Using its access to refined product logistics income for the first three quarters of 2014.11 During this time, infrastructure, PES moved its products through the Northeast the company appeared to be on more solid financial footing. U.S. through pipeline connections to other cities and consumer Its leaders publicly announced various initiatives to expand markets, including Pittsburgh, western New York, and the New and enhance its operations.12 PES issued initial public offering York Harbor. PES also had the capability of transporting finished (IPO) paperwork with the SEC for its rail logistics business in products to market by barge or ship, by truck via the adjacent September 2014, and for its refining and marketing business in ETP-owned Belmont Rack, or by rail.8 February 2015.

Oil by Rail The competitive edge provided to PES from access to less expensive domestic crude, however, would not last. Over time, Petroleum refining is a capital-intensive business that requires pipelines like the Dakota Access pipeline were constructed that significant and ongoing investments to maintain safe and efficient linked the Bakken oil fields to markets and refineries in other operations. PES made significant capital investments to try to parts of the country, mainly in the Gulf Coast and Midwest. These improve the refinery’s economic sustainability and reverse years pipelines allowed Bakken crude oil to move more cheaply and of financial losses. The sale of the refinery to PES approximately efficiently to those places and also lowered the “shut-in” Bakken coincided with the development of crude oil from domestic crude discount. However, pipelines were not built to bring the shale resources. This new domestic supply of light, sweet crude Bakken crude oil to the Philadelphia region. In addition, the cost oil came from places like North Dakota’s Bakken region or the to move crude by rail was no longer affordable for PES when Permian basin in Texas. At the time, these newly economic oil the huge Bakken crude discount was reduced. Therefore, PES fields were geographically isolated and lacked extensive or and other regional refineries were forced to go back to relying efficient pipeline connections to markets. As a result, the primary on more costly Atlantic-borne crudes. In general, this dynamic way to move this new crude supply from the well to customers served to benefit Gulf and Mid-Western refineries and harm was by train. Given how this “shut-in” supply was difficult to refineries on the East Coast. logistically deliver to market, this light, sweet crude oil traded at a substantial price discount relative to other comparable Concurrent with the above developments, in November 2014, the crudes. This discount made new oil shale supplies economically Organization of the Petroleum Exporting Countries (OPEC) made attractive, even with the significant price premium associated a pivotal decision to not cut crude oil production at a time when with shipping crude by rail. supplies were plentiful, and the prices were low – which resulted in international Brent crude prices plummeting from a weekly Historically, the Philadelphia refinery relied almost exclusively average of more than $108 in 2013 to less than $55 in 2017. As a on crude oil shipped across the Atlantic via marine vessels. result of these developments, the price discount that once existed These Atlantic-borne crudes often came from politically unstable for bringing trains of Bakken to Philadelphia, compared to buying countries and included costly shipping premiums. PES took light sweet crude oil on the global markets, shrank considerably advantage of new, discounted domestic oil supplies as an and so too did PES’ competitive advantage.13 opportunity to enhance competitiveness. It constructed, with state support, an advanced $130 million railyard to the north of As these market dynamics unfolded, it made less economic the refinery that had the capability of offloading four 104-car unit sense to ship Bakken oil by rail to East Coast refineries. These trains each day – meaning that up to 280,000 barrels per day shipments peaked in November 2014 at 13,754,000 barrels per could come by rail from this less expensive source.9 However, month, and shrank to less than 3,000,000 barrels per month by moving large unit trains of oil through a dense metropolitan area 2017.14 PES and other East Coast refineries, therefore, became on a regular basis was not without controversy or public concern. more dependent on traditional, more expensive imported crude This was due in large part by the hazards exposed during an oil oil deliveries by ship while their competitors in the Midwest and train accident and explosion in Quebec in 2013 that killed 47 Gulf Coast gained greater access to less expensive domestic people. In fact, an oil train derailed on the nearby Schuylkill River crude oil from new pipelines. Gulf and Mid-Western refineries bridge that resulted in a tank car dangling over the river but, also benefited from access to steeply discounted Canadian luckily, was resolved without incident.10 tar sand-based crudes. These heavy, sour crudes require more complex refining capabilities to process - capabilities that PES does not possess.

10 The Philadelphia Refinery U.S. Renewable Fuel Standard Financial Challenges and First Bankruptcy

The U.S. Renewable Fuel Standard (RFS) program was created For a time in 2014 and early 2015, PES appeared to be on stronger by Congress through the Energy Policy Act of 2005 and was financial footing and the company experienced positive net income. amended thereafter. The law requires a portion of traditional During this period, PES explored an initial public offering (IPO) for petroleum-based transportation fuel to be replaced by certain its rail yard logistics subsidiary, as well as a separate, larger IPO for volumes of renewable fuel (e.g. corn-based ethanol, biomass- the marketing and refining business. These transactions would based diesel) that deliver lifecycle greenhouse gas reductions. have made the private venture, which was self-valued at more than These volumes (called renewable volume obligations, or RVO) $1 billion in February 2015, publicly traded and would have raised are set by law and updated through regulations. additional capital from investors to enhance and expand operations. However, due in large part to both poor timing and broader energy Refineries and importers of petroleum fuels are required to market conditions, PES postponed the IPO in August 2015 and the comply with the RFS by either buying compliance credits (called company remained in private ownership.18 renewable identification numbers, or RINs) through a market, or generating their own RINs by blending renewable fuels with In large part due to the financial burdens caused by shrinking traditional transportation fuels. These parties are required to crude oil price advantages, increased compliance costs with obtain enough RINs to meet their annual RVO.15 the federal Renewable Fuel Standard (RFS), investor dividends, and significant debts incurred from investments made in capital In its January 2018 bankruptcy filing, PES attributed RFS infrastructure, PES began to face a worsening financial position. compliance costs, loss of access to cheap domestic crude, and In June 2016, reports surfaced that PES was looking for a buyer, declining gross refining margins at the top three factors driving but none materialized. In July 2016, PES cut production by 10% the company into insolvency. As a merchant refinery - meaning due to low profit margins and shortly after implemented a series it relies on the market, not affiliated businesses to purchase of cost cutting measures targeted toward employee benefits, feedstock and sell refined product - PES is less insulated from RIN staff buyouts, and layoffs. Moody’s downgraded PES’ debt in market price volatility compared to its vertically integrated peers November 2016 and again the following year, from B1 to Ca.19 that generate RIN credits through affiliated businesses. And, RIN prices can be quite volatile. For example, in late 2017, prices for With a $523 million term loan set to mature in April 2018, PES D3 RINs were trading near $3.00 per credit, while by late 2019 filed Chapter 11 Bankruptcy for the first time on January 21, 2018 credit prices were trading below $1.00.16 with the goal of continuing operations while restructuring its financial obligations. At the time it filed the bankruptcy petition, Sunoco (via Energy Transfer Partners) operates the Belmont PES was more than $580 million in debt secured by its refinery Rack, located at the Philadelphia refinery site near 26th Street business, plus more than $97 million in debt secured by the and Passyunk Ave. The Belmont Rack generates significant RIN affiliated rail yard logistics business. The company also owed credits that accrue to Sunoco via its on-site blending operations. significant tax liabilities.20 However, the PES refinery does not presently have the ability to blend renewable fuels and has relied mainly on purchasing The Chapter 11 process provided PES with some relief from RINs on the market to meet its RFS obligations. This strategy its debt obligations, including more than $200 million in has cost PES a substantial amount of money when RIN prices outstanding RFS compliance costs, and allowed the company were trading at high prices, from an annual cost of $13 million to raise $260 million in new capital. Owners of approximately in 2013 to an annual cost of $218 million in 2017. At one point, $525 million in debt extended $417 million of that debt until total RFS compliance costs were twice PES’ annual payroll and 2022 and exchanged the remaining obligations for 75 percent represented its second largest operating expense after crude oil. equity in PES. Through this process, PES was able to maintain At the time of its first bankruptcy filing, PES owed $350 million in refinery operations and two of the company’s lenders – Credit additional RIN compliance obligations.17 Suisse Asset Management and Bardon Hill Investment Partners (formerly Halcyon Capital Management) – became the largest Any future petroleum refining business at the Philadelphia refinery shareholders.21 site will be obligated to comply with the RFS, absent the law’s repeal or revision. Successfully managing RFS compliance costs to limit downside risk when credit prices are high may be one of several key factors in maintaining financially viable refinery operations.

11 The Philadelphia Refinery

PES Equity Ownership (after first bankruptcy) However, questions arose over the long-term economic viability of PES to continue operating as it had been. Though the Chapter Equity Holder- Percentage of Equity Held 11 process helped PES with restructuring and providing relief for some of its financial obligations, challenges remained. Unless significant investments were made to improve PES’ RFS Credit Suisse Asset Bardin Hill Investment compliance strategy, federal renewable energy policy changed Management Partners significantly, feedstock costs declined, or refinery margins 29.43% 26.71% otherwise improved, the underlying structural and financial challenges facing PES would persist and at least one analysis anticipated a second bankruptcy filing in the future once the Carlyle PES LLC PES Equity LLC maturity date for more than $417 million in restructured debt 15.00% 7.43% approached in 2022.22 And then, on the morning of June 21st, 2019, a segment of elbow pipe at alkylation unit 433 at the Girard Point refinery Third Point Loan LLC Other Equity Holders complex that was installed in the early 1970s failed, leading to a 7.27% (combined) catastrophic fire and explosion. 14.16%

Source: List of Equity Security Holders, Filed July 21,2019, In Re: PES Energy, Inc. Docket No. 19-11630, U.S. Bankruptcy Ct, Dist. DE.

The Philadelphia Refinery: A Business History

After announcing January 21 its plan to exit the PES declares Chapter 11 unprofitable refining Bankruptcy Gulf Oil builds oil business, Sunoco terminal at Girard announces its intent March 26 Atlantic Petroleum Point, just to the Sunoco purchases to sell or close PES Chapter 11 Storage Company Point Breeze south of the Point Point Breeze Philadelphia refinery Bankruptcy begins operations refinery purchased Breeze refinery. refinery complex. reorganization plan at site. by Standard Oil. approved.

1866 1870 1874 1891 1920 1926 1988 1994 2011 2012 2018 2019

Atlantic Refining Point Breeze refinery Gulf Oil builds a Sunoco purchases Philadelphia Energy June 21 Company starts refining produces 50% of new refinery at Girard Point Solutions (PES) is A catastrophic explosion operations at Point world’s lighting fuel Girard Point. refinery created to purchase occurs at an alkylation Breeze portion of site. and 35% of U.S. and continue unit at the PES Girard petroleum exports. operating the Point refinery complex. Philadelphia refinery complex. July 22 PES declares Chapter 11 Bankruptcy for a second time, announces its intention to wind down operations and position 12 the asset for sale. Throughout its long history and its chain of ownership, the oil refining industry has produced positive economic benefits to the City and to the region. However, around the time of the Great Recession and weaker demand, the region’s entire refining industry (which was comprised of 6 refineries at the time) was in economic trouble and its future looked grim. In 2009, Valero announced its intent to permanently close its large refinery in northern Delaware (which subsequently reopened under a new owner). That same year, Sunoco idled its Eagle Point, NJ refinery and later demolished it. In 2011, the ConocoPhillips refinery in Trainer, PA was idled (and later reopened under a new owner), and Sunoco announced its intention to fully transition out of the refining industry – threatening the future of its two remaining refineries in Marcus Hook and Philadelphia, PA. The sixth refinery, then operated by Valero in Paulsboro, NJ, was not seriously threatened with permanent closure, but it was purchased by a new operator in 2010.

In 2011, after several tumultuous years for the region’s refining industry and when Sunoco announced its intent to exit the refining business, many government, labor, business, and political leaders rallied behind the need to “rescue” what was left of the refining industry due to its importance to the Philadelphia regional economy and its potential impact on gas prices. These efforts, when viewed through the lens of trying to preserve jobs and economic activity at a time when the industry was contracting and the region was still continuing to recover from the Great Recession, were successful for a time – the Benefits Of The Trainer refinery was purchased by a subsidiary of Delta Airlines and continues operations, the Marcus Hook refinery complex was repurposed to take advantage of its location and assets to Refinery serve as a natural gas liquids logistics and export facility, and the Philadelphia refinery was purchased by a new joint venture and continued to operate as a refinery.

As noted previously, the Philadelphia refinery – with state assistance – also developed new infrastructure such as the rail yard to try to enhance its competitive advantage in the years ahead. Thousands of highly paid, highly skilled, and difficult to replace jobs were preserved. For a time, the refinery appeared to Many government, labor, be on stronger footing, and its leadership was encouraging the business, and political leaders development of a regional “energy hub” to take advantage of the existing infrastructure, location advantages, and connections rallied behind the need to to the burgeoning Marcellus Shale natural gas field and position “rescue” what was left of the Philadelphia as a significant anchor of the energy industry once refining industry due to its again. For many reasons, the vision of Philadelphia as an “energy hub” has not come to fruition – but numerous proposals to expand importance to the Philadelphia energy-related uses in proximity to the refinery have continued to regional economy and its emerge – including LNG, biofuels, and renewable natural gas. potential impact on gas prices

13 Benefits of the Refinery

When the announcement came one year ago that this refinery was “ closing, the future seemed grim. By using imagination and a spirit of partnership, we found a solution.”

PA GOVERNOR TOM CORBETT, SEPTEMBER 19, 2012.23

Economic Impact The analysis also estimated that the PES refinery had a total economic impact to the City of Philadelphia of $2.1 billion. The The Philadelphia region’s refining economy has contracted since refinery supported a total 6,300 full-time jobs (including indirect the Great Recession, from six refineries operating in early 2009 and induced) in Philadelphia (7,650 in Pennsylvania) with a total to four a decade later. However, the remaining refineries have annual compensation of $600 million. significant economic impacts, both locally and regionally. By their very nature, refineries have long and complicated supply Furthermore, a customized tax model used by Econsult Solutions chains and rely on a wide range of vendors and suppliers. estimated that the PES refinery had a total annual tax impact to Most of PES’ largest vendors by dollar value were engaged the City of Philadelphia of $33.2 million, and a tax impact to with shipping and logistics through railroads, pipelines, and the Commonwealth of Pennsylvania of $30 million (while also water-borne commerce; construction contractors; engineering accounting for the refinery’s KOZ status). This data was not based services; employee benefits; specialty equipment rentals; and on actual tax data due to confidentiality issues.24 chemical supplies. In August 2019, PES reported a preliminary estimate to the City that between January 2018 and June 2019, it The analysis was intended to estimate the impact from a typical paid its 40 largest regional vendors more than $720 million. year of steady-state operations at the refinery. It is important to note that the estimate was prepared using an economic forecasting model tailored to assess the refining industry in the Philadelphia region, and limited data sets were available. Modeled Economic Nevertheless, the findings indicate that the PES refinery had a substantial impact on the region’s employment levels, tax base, Impact of PES and economic activity.

This report acknowledges that this analysis is limited in scope to the economic impact generated by PES in the form of Average Annual Full-Time Total Annual Employee employment, spending, tax payments, and relevant multipliers. Employees (including contractors) Compensation It does not attempt to capture any costs that may be attributed, 1,950 $237m wholly or partially, to any negative externalities associated with the refinery such as adverse health impacts in adjacent communities. While these factors are important to consider, such an analysis is difficult to accurately quantify and attribute Total Annual Expenditures specifically to the refinery given the many other contributing factors in the area, the presence of other pollution sources, and $1.1b the complexities associated with the long periods of exposure and long latency periods often associated with many of the health impacts often associated with industrial pollution. Through the Refinery Advisory Group process, Econsult Solutions was contracted to perform a preliminary analysis of Jobs the economic impacts of the refinery complex. That preliminary analysis estimated that in a typical year, PES was responsible for In addition to having a broad economic impact throughout the directly employing an average of 1,950 full-time employees with region, the refining industry has traditionally been a large employer a total annual compensation of $237 million and total annual of a highly skilled workforce. In January 2018, PES employed expenditures of more than $1 billion. approximately 1,100 people25 in a wide variety of occupations –

14 Benefits of the Refinery including but not limited to managers and corporate executives, refinery quickly reopened so they could go back to work, while refinery operators, rail car unloaders, tank field operators, laboratory others expressed their concerns over what the future would technicians, scale operators, warehouse staff, mechanics, and mean for them and their families. skilled trades. As reported in The Philadelphia Inquirer, according to the Federal Reserve a Pennsylvania refinery worker earned Domestic Energy Supply approximately $107,000 per year, on average.26 For many years, the Philadelphia region was home to a While the direct employment numbers are certainly substantial, substantial percentage of the East Coast’s limited oil refining consideration must also be given to the large contracted workforce capacity. Prior to the June 21st incident, PES operated 28% of the that would be employed at the refinery on a regular basis. While East Coast’s refining capacity. The three Pennsylvania refineries PES employed 1,100 to operate the plant and the company daily, in operation ten years ago were responsible for operating hundreds of skilled building trades workers would also be on site approximately 50% of the East Coast’s refining capacity – leading frequently to perform construction and maintenance activities at to concern over the extent to which the region would become various parts of the facility. According to Ryan O’Callaghan, former more dependent on imported fuel if all three facilities closed.29 president of the United Steelworkers Local 10-1, contracted building The strategic importance of the regional refining industry to trades employees worked more than 8 million hours in the previous the East Coast energy supply was cited as a significant concern six years at the Philadelphia refinery.27 when political figures rallied to rescue the refining industry at the beginning of this decade. In early 2012, when the future of the entire regional refining industry was in question, Reuters reported that the Pennsylvania Although the Philadelphia refinery is home to a substantial Department of Labor and Industry produced a study estimating percentage of the East Coast’s refining capacity, it was notable that 18.3 jobs would be lost for each refinery job lost, and that the that no significant shortages of motor fuels were reported in the total economic loss for the affected communities would be more region following the closure of either the Philadelphia refinery than $566 million in state and local taxes. In the same time period, or other regional refineries in recent years. This was likely due, in the Delaware County Daily Times reported that more than 36,000 large part, to the region’s heavy dependence on, and the ready jobs were in jeopardy due to the potential closures of the three availability of fuels being imported into the region from other Pennsylvania refineries at Marcus Hook, Trainer, and Philadelphia.28 places, such as the Gulf Coast or refineries located abroad. Preserving and protecting the jobs associated with the refining industry has long been a priority in the region. Due to the Although no critical fuel shortages or price spikes were reported at contraction of the East Coast refining industry over the last the time, it is worth noting that the East Coast is increasingly reliant decade, many of these highly skilled, high quality jobs are on fuels that are refined in other places. PADD 1 – the federally difficult to replace within the region – forcing many displaced designated region that encompasses the East Coast for fuel data workers to relocate to other regions (e.g. Mid-West or Gulf Coast collection purposes – is a net importer of petroleum fuels that are refining areas) or to change careers. made elsewhere. According to the Energy Information Agency, the PADD 1 region consumes more transportation fuels than any Current and former employees of PES attended every Refinery other domestic region but has the refining capacity to meet just Advisory Group public meeting. Many spoke to personally one fifth of the region’s consumption.31 express a tremendous sense of pride in the work they performed and emphasized the importance they placed on safety while Refining capacity in PADD 1 has declined as refineries have operating the refinery. Many also expressed understandable shuttered – from a high of 1,741,000 barrels per day in July 2004 frustration at the events that led up to the present day, including to 889,000 barrels per day by August 2019 after PES idled its frustration toward various decisions made by corporate operations.32 Demand in PADD 1 for fuels has also decreased management. Many expressed a strong desire to have the over time. In a similar period of time, total volume of all finished

Philadelphia Energy Solutions can help the United States work its way “ back to energy-independence and economic pre-eminence.”

PA GOVERNOR TOM CORBETT, SEPTEMBER 19, 2012.30

15 Benefits of the Refinery petroleum products supplied to PADD 1 dropped from New Jersey, and New York regions that once had reliable 6,731,000 barrels per day in January 2004 to 5,504,000 barrels access to transportation fuels from pipelines connected to the per day by August 2019.33 Philadelphia refineries. Now, these markets, like the rest of the East Coast, are more dependent on fuels being shipped from This deficit between the region’s demand for fuels and limited Gulf Coast pipelines or barges. refining capacity has traditionally been met by deliveries of refined fuels via pipelines and ships from the Gulf Coast or from Given the multitude of factors involved, it is too early to tell what abroad. However, this dynamic presents potential risks to the the ultimate impact of the Philadelphia refinery’s closure may East Coast’s fuel supply in the event of pipeline disruptions or have on fuel prices or energy supplies in the East Coast more severe weather events impacting shipping traffic or refining broadly or in the Philadelphia area specifically. However, this activities. This risk may be particularly acute in the Pennsylvania, dynamic is worth paying close attention to moving forward. What We’ve Heard

The economic benefits of the refinery don’t As soon as you walk into PES, they tell you “ just pertain to the City of Philadelphia but “ three things: Be safe, keep the products in the throughout the whole Delaware Valley pipes, and take care of the community.” region…we have to do everything we can to get the refinery up and running again.” TERRENCE F., AUGUST 21, 2019

MARTIN W., AUGUST 6, 2019

We are constantly worrying about safety and the environment – nonstop.” This is devastating. No one wins if we lose this “ “ refinery.” BRANDON P., AUGUST 21, 2019

JOHN B., AUGUST 6, 2019

The refinery is monitored daily, we have all “ kinds of equipment that tests the gases that The Northeast is going to be devastated by come out of all equipment and monitors “ the closing of the refinery.” around the perimeter…”

SHAWN T., AUGUST 20, 2019 BILL R., AUGUST 20, 2019

Our families depend on the health and welfare We have an environmental department at “ benefits and we are concerned about losing “ PES that really looks out for others…nothing our healthcare and pension.” happens at PES without the proper permits.”

DENNIS K., AUGUST 21, 2019 JIMMY M., AUGUST 20, 2019

16 The refinery contributed many positive benefits to the Philadelphia region in the form of jobs, economic activity, tax revenue, and security and stability for the region’s energy supply. However, the refinery also had significant negative impacts that must be considered, as well. Air Pollution

Oil refineries, by their very nature, produce a variety of emissions from numerous processes. Distillation units, alkylation units, cracking units, pumps, boilers, heaters, flares, storage tanks, and other critical systems all generate different forms of air pollution. During steady state operations prior to June 21st, the Philadelphia refinery was the largest stationary source of air pollution in the city. According to the Department of Public Health, the refinery was estimated to be responsible for approximately 9% of the city’s fine particle (PM2.5) emissions Costs of the and 20% of greenhouse gas emissions. Additionally, the refinery was the largest single emitter of toxic pollutants in Philadelphia. On average, the refinery has released Refinery 467,600 lbs. of air toxics annually since 2014. According to 2016 data from the EPA’s Toxic Release Inventory, the 464,284 lbs. of toxic emissions attributed to the refinery represented 56.65% of total toxic emissions from larger sources in Philadelphia that Fine Particles (PM2.5) year. These toxic emissions include benzene and other known carcinogens.34 Other stationary PES sources 5% 9% Types of Air Pollution Mobile sources “Criteria Pollutants” are 6 common pollutants defined 86% by the EPA that are mainly produced by combustion and are associated with poor air quality, heart and lung disease, and reduced life expectancy. These include particulate matter (PM2.5 and PM10), nitrogen dioxide, ozone, carbon monoxide, sulfur dioxide, and lead. Greenhouse Gases* “Air Toxics” are chemicals that may have long-term risks for cancer or other serious health or environmental effects. These PES 20% chemicals are typically released from industrial sources and Other include benzene, dioxin, and formaldehyde. stationary sources “Greenhouse Gases” are gases that contribute to climate 8% Mobile sources change by absorbing and emitting radiant energy in the atmosphere. Many of these gases are naturally present, but 72% the burning and development of fossil fuels are a major source of them. Examples include carbon dioxide, methane, and nitrous oxide.

*Including carbon dioxide, methane, and nitrous oxide 17 Costs of the Refinery The Philadelphia Department of Public Health, through its Air railroad lines, the Philadelphia International Airport, and port Management Services (AMS) division, administers and enforces facilities - all of which are significant sources of PM2.5 and other local, state, and federal air pollution requirements as applicable forms of air pollution. At least one commenter claimed that to the refinery. This effort includes: the level of toxic air emissions in neighborhoods closer to the refinery have been, on average, higher than in the city overall.39 • Issuance of air pollution permits that provide for air pollution emission limits, work practice, record keeping, emissions However, 2014 EPA National Air Toxics Assessment (NATA) data testing, and air pollution monitoring requirements. These indicates that the Respiratory Hazard Index (i.e. the likelihood requirements include the siting of fence line air monitors for that exposure to air toxics would lead to adverse, non-cancerous certain Criteria Pollutants. health effects) for these neighborhoods is among the lowest 40 • Routine inspections of the facility to ensure compliance with in the City. The NATA data also indicates that cancer risk from air pollution permits and attendant requirements. These exposure to air toxics in these neighborhoods is comparable 41 inspections are often performed in conjunction with the EPA. to the cancer risk rates in Center City Philadelphia. Similarly, the City’s air monitoring network measurements indicate that • Operation of a city-wide air pollution monitoring network neighborhoods near the refinery, on average, have PM2.5 levels that measures airborne concentrations of Criteria Pollutants. comparable to the citywide average.42

Additionally, following a Consent Decree, PES operates air Health Impacts monitors along the fence line to measure particulate matter (PM2.5 and PM10), ozone, sulfur dioxide, lead, carbon Concerns over the impacts of the refinery on public health monoxide, nitrogen oxides, hydrogen sulfide, and benzene.35 were a dominant theme of the comments and feedback raised throughout the Advisory Group process. This concern was The refinery has a significant history of permit deviations. expressed by numerous members of the public, advocacy However, capital improvements and equipment upgrades have organizations, and academic experts at every public meeting been made over the years to reduce emissions at the refinery. hosted by the Advisory Group. Since 2014, annual releases of air toxics from the refinery dropped by approximately 38% when compared to 2011-2013 While it is well understood that pollution can negatively impact figures.36 Since PES took ownership of the facility in 2012, AMS public health, it is difficult to attribute specific public health has issued 7 Notices of Violation (NOVs) to the refinery for air impacts to any specific industrial site when the public is also pollution - about one every year.37 The violations cited in these exposed to pollution (and other health risks) from other sources. NOV’s ranged in severity from minor odor or opacity events to According to the EPA, calculating the impact that exposure to air emission limit exceedances from certain heaters, boilers, and pollution has on people depends on many factors, such as the other process equipment.38 However, the number and severity amount and type of pollution, the specific mixture of pollutants, of the violations in the NOVs were not serious enough to warrant exposure doses and durations, and individuals’ susceptibilities closure of the refinery, or major infrastructure changes. to diseases.43 Determining causation becomes even more complicated when considering that long latency periods often Air pollution from the refinery complex has been a source of exist between the time of exposure and the onset of cancer concern in surrounding communities for a long time, and the and other health effects. However, data strongly suggests that refinery’s prior owners faced lawsuits from community and Philadelphians suffer disproportionately adverse health effects, environmental groups seeking to force changes to reduce and many of these health effects are correlated to emissions like pollution from the site. Concerns over pollution and its impacts those generated from the refinery.44 on public health were a dominant theme raised by members of the public throughout the Advisory Group process. The National Cancer Institute estimates that Philadelphia has the highest cancer rate of any large city in the U.S. The data indicates While the data indicates that the refinery is a significant source that in Philadelphia, 541 of every 100,000 people will get cancer of air pollution, including certain air toxics that are known to compared to 442 per 100,000 nationwide and 494 per 100,000 have adverse health impacts, it is not the only significant source for Pennsylvania. Philadelphia has a higher rate of lung cancer and of air pollution impacting nearby communities. For example, kidney cancer than the state average – and both cancers are linked the largest source of Philadelphia’s PM2.5 (86%) fine particle to exposure to particulates and benzene. Additionally, Philadelphia emissions is mobile sources, which includes exhaust from has an asthma hospitalization rate three times higher than the state transportation vehicles. The neighborhoods nearest the refinery, average, according to the PA Department of Health.45 in particular, are located in close proximity to major highways,

18 Costs of the Refinery While there are many contributors to these health outcomes, In the present day, the refinery complex has its own advanced exposure to volatile organic compounds and particulate wastewater treatment system on site to clean and process emissions, over time, increase these risks to human health. stormwater runoff on the site, which mitigates the flow of These health impacts may include respiratory illness, cancer, and pollution into nearby waterways. However, the refinery is still negative birth outcomes. responsible for more than 5,000 pounds of water pollution annually and historical contamination remains in the ground Though the City is not aware of any studies that have focused throughout the site.47 on the direct impact of this refinery on health, studies have been performed elsewhere that indicate the impact that air pollution from Sunoco was mandated by consent order to clean up the soil oil refineries can have on respiratory health impacts. According to and water on the site. Sunoco retains responsibility through its testimony presented by members of the Drexel University School subsidiary, Evergreen Resources Management Operations, to of Public Health, air pollutants such as nitrogen dioxide, PM2.5, remediate most of these liabilities. To fulfill this obligation and and sulfur dioxide have been associated with increased respiratory release itself from state and federal liability once the remediation illnesses among people living near refineries.46 work is completed, Sunoco entered the site into Pennsylvania’s Act 2 voluntary remediation program. Sunoco’s remediation In summary, it is clear that the refinery has been a significant source plans call for the vast majority of the site to be remediated to of air pollution in Philadelphia. It is also clear that exposure to a site-specific, non-residential standard. Sunoco’s subsidiary, certain air pollutants poses health risks, and that a reduction in Evergreen, has funding in place to support the remediation air pollution can be expected to lead to better health outcomes. work, which will take many years to complete. However, there are many other sources of air pollution that impact nearby communities, and many other communities within Criticism and concerns have been raised over how the required Philadelphia that are located a greater distance away from the Public Involvement Process (PIP) for the Act 2 plans was handled. refinery are exposed to similar levels of air pollution and associated Many argued that Evergreen did not hold the appropriate public health risks. Therefore, while a reduction in air emissions from meetings or make information available to the public as required the refinery site may help improve Philadelphia’s air quality more by Act 2. In response to this criticism, the City of Philadelphia generally, it is difficult to tie that reduction in refinery emissions has requested that Evergreen create a new PIP and adhere to a directly to a reduction in the air pollution that impacts any specific longer time frame for accepting public comments. During the community or population because there are other relevant risk Advisory Group process, many expressed concern about current factors and pollution sources involved. environmental conditions of the site and about Evergreen’s intent to remediate the site based on a non-residential standard, In addition to considering the human toll caused by these factors, with many advocating for a more stringent standard that would one must also consider the negative economic impacts caused enable portions of the site to contain a wider range of activities by public health detriments when evaluating the full picture of than continued heavy industrial or commercial uses. However, economic benefits and costs of any large industrial facility. While under Act 2, the responsible party is permitted to remediate to this is an important consideration to make, due to limitations in a site-specific standard and there is no obligation to restore site data it was a calculation that was beyond the scope of this report. conditions to what they were before a refinery was built. Soil and Ground Water Pollution Dangers Posed by Hazardous Chemicals

While any petroleum-related land use is likely to have some level Oil refineries, by their very nature, contain many different of pollution or contamination associated with it, the Philadelphia hazardous chemicals – often in large quantities. These risks are refinery site suffers from particularly extensive soil and ground magnified by the dangers posed by processing large quantities of water contamination due to its very long history of processing highly flammable or explosive materials in close proximity to those oils. For the site’s first century of operations, virtually no other chemicals. Risks to public health and safety are magnified by environmental laws or regulations existed. conducting refining activities in densely populated areas.

Liquid refinery products like gasoline are present on the The Philadelphia refinery complex has suffered from large groundwater in many areas beneath the site, and evidence fires throughout its history – some of which ended with fatal suggests that these contaminants likely have migrated offsite – consequences. The refinery has a dedicated fire brigade that is which may also potentially impact a drinking water aquifer used specially trained to respond to emergency issues and works closely by New Jersey. with the Philadelphia Fire Department. But nevertheless, fires can and do occur – and they pose a particularly high risk in a refinery setting.

19 Costs of the Refinery While risks can be managed and precautions taken, risks can be disproportionate impacts on low-income people who have fewer minimized and planned for but never truly eliminated. According choices about where to live, and these concerns were repeatedly to the U.S. Chemical Safety and Hazard Investigation Board raised by the public during Advisory Group meetings. (CSB), the bulk hydrogen fluoride (HF) used at PES contained an additive intended to reduce its volatility in the event of a release.48 However, this additive, while significantly slowing the evaporation/volatilization of the HF if released, could not totally Population within 1 mile of eliminate the risk of a release caused by a large explosion nearby, as the events of June 21st demonstrated. refinery fence line

Regardless of how well the workforce is trained, and how many safety precautions are in place, something could Total population (2018 est) Total $ of households always go wrong at a large industrial site like a refinery. And when hazardous chemicals are in close proximity to highly 113,271 42,676 flammable liquids, in the center of an urban area, the potential consequences are even higher. Racial Demographics

Urban Context Other Hispanic/Latino of Any Race 2.6% 4.7% The geographic context in which the Philadelphia refinery is 2,964 5,313 situated is far from ideal in many ways. While the site has many Asian Non-Hispanic positive benefits to the refinery due to its infrastructure and 9.4% access to road, rail, and water transport, it sits amid one of the 10,612 White most densely populated parts of the U.S. Non-Hispanic 22.9% When the refinery site was first used for petroleum production, it 25,948 had few neighbors – and the area along the lower Schuylkill was Black/African American specifically used for petroleum production to isolate the city from Non-Hispanic the dangers to the public and waterways. Over time, however, 60.4% the city grew around the refinery and now more than 113,000 68,434 people live within 1 mile of its fence line, and more than 1 million people live within a 7-mile radius.49 Residential encroachment near the refinery site occurred decades ago, at a time when it was not uncommon for homes to be built directly across the Number of Households by Household street from polluting industries. This development occurred before zoning laws or comprehensive development plans came Income Range into practice and would not be encouraged today. Range of average household income levels by census block $14,880 - $114,821 However, although the refinery came to the site first, the reality in recent decades is that many of the communities located closest Households with income to the refinery, which are most directly impacted by air pollution $100,000+ 11.3% 4,820 Households and other negative external factors, are disproportionately Households 8.5% with income populated by lower income populations and communities with income 3,615 less than $75,000 - $99,999 $25,000 of color - many of whom did not choose to reside in close 15.6% 38.6% proximity to an oil refinery or have the means to relocate. While 16,492 Households 6,675 many middle- and upper middle-class neighborhoods are with income located within one mile of the fence line, there are also large $50,000 - $79,999 public housing developments and historically disadvantaged 25.9% 11,074 neighborhoods located in the same proximity. This dynamic Households raises obvious concerns around environmental justice and with income $25,000 - $49,999

Source: 2018 demographic estimates from Esri “Popular Demographics in the United States” data set, updated July 1, 2019.

20 Costs of the Refinery Median Household Income Within 1 Mile of Refinery

2018 Median Household Income (Esri) ≤$70,795 (15) ≤$48,863 (23) ≤$35,839 (18) ≤$27,590 (30) ≤$18,493 (13)

Additionally, the presence of the refinery has negative impacts on Climate Change/Environmental Concerns the perception that many visitors have of Philadelphia. For much of the refinery’s history, Philadelphia was a bustling hub of dirty, heavy Concerns over the broader environmental impact of oil refineries manufacturing industry that took advantage of the City’s access to were also frequently raised throughout the Advisory Group process. ports, rail, markets, and workers. In recent decades, however, as heavy industries industry declined, Philadelphia has experienced The fossil fuel industry is a well-known contributor to carbon a rebirth fueled by economic sectors that rely more heavily on dioxide and other greenhouse gas emissions. According to the service economy, tourism, hospitality, higher education, and the EPA and as reported by Christina Simeone, the PES refinery other non-industrial sectors. Major highways and the Philadelphia was the 8th largest emitter of greenhouse gases in Pennsylvania International Airport were built, putting the sprawling refinery’s and the largest, by far, in Philadelphia. As of 2014, the refinery location near a primary gateway to the City. As Philadelphia has emitted between 2.9 and 3.2 million metric tons of carbon tried to transform its economy from post-industrial decline to an dioxide equivalent annually.50 attractive and competitive place to do business in the modern economy, concerns were raised by some through the Advisory Mainstream scientists have increasingly sounded the alarm Group process as to whether the site should continue to be seen over the need to reduce carbon emissions in order to have a as an anchor to the traditional, regionally declining petroleum meaningful impact on the threats posed by climate change. economy or whether it should be used to position Philadelphia The most recent report from the International Panel on Climate as a hub of economic rebirth and exemplify the creation and Change indicates that worldwide carbon emissions must development of energy jobs of the future. be slashed by 2030 before the impacts of climate change

21 Costs of the Refinery become irreversible. The City of Philadelphia has recognized It is worth noting that although an end to refining activities at the importance of reducing global carbon emissions in order this specific location may help with reducing the City’s carbon to mitigate the impacts of climate change, and Mayor Kenney emissions and meeting its long-term climate goals, this impact committed to upholding the commitments of the Paris climate must be balanced against the reality that fossil fuel development agreement at the local level and reduce Philadelphia’s carbon continues to increase in other parts of the world – including emissions between 26 and 28 percent by 2025, with a long- in areas that do not have the same level of environmental term goal of 80% reductions by 2050. regulations. Ultimately, reducing consumption of fossil fuels and increasing the adoption of cleaner technologies will have a more Many have advocated for a moratorium on fossil fuel development significant and lasting impact on lowering carbon emissions than and an increased focus on adopting and developing clean energy shuttering one refinery. technologies that reduce consumption of fossil fuels. These concerns were voiced throughout the Advisory Group process, Specific to the PES refinery, climate change also poses tangible along with broader calls to use the closure of the PES refinery risk to significant portions of the site. Due to its low elevation as an opportunity to highlight the potential to retrain displaced and location along a tidal waterway, portions of the site are petroleum workers for jobs in the green economy. vulnerable to increased flooding risks due to sea level rise – a topic discussed in greater detail later in this report. What We’ve Heard The closure of the PES refinery represents “ a major improvement to air quality, public health, and quality of life in Philadelphia We are living in fear…I just want my family to live.” and would remove the city’s single largest “ industrial contributor of greenhouse gases.” SONYA S., AUGUST 20, 2019 MATT W., AUGUST 6, 2019

It’s a sad day when people can’t work, but The City should use any influence it has “ it’s also sad when you lose family members “ to transform this site into something that and you know when your doctors tell you it’s serves the clean energy economy rather than because of the fossil fuels at the refinery….” something that impedes it.”

SYLVIA B., AUGUST 20, 2019 – MARK S., AUGUST 27, 2019

“I am extremely concerned about the “ hydrogen fluoride stored on-site.” It is time to demand that labor leaders start “ rapidly preparing members for the transition KATHERINE R., AUGUST 6, 2019 off of fossil fuels because it is coming, and we all need you to be ready.”

TAMMY M., AUGUST 21, 2019

22 Costs of the Refinery

South Philly is the best neighborhood for several While transitioning from petroleum as the “ reasons, except for the air pollution…we have “ source of our carbon-based chemicals poses a had so much tragedy in South Philly due to great challenge, it also presents a tremendous asthma.” opportunity for a sustainable and prosperous future.” VIRGINIA H., AUGUST 6, 2019

NADINE G., AUGUST 27, 2019

I got involved with Philly Thrive because we as an organization believe that everyone has the “ The fact is, we don’t need the refinery. right to breathe clean air.” “ Philadelphia has an opportunity to be a clean, green city.” MARK C., AUGUST 20, 2019

PAMELA G., SEPTEMBER 9, 2019

I believe Philadelphia wants this land for non- “ polluting, non-fossil fuel purposes…given what we know about climate change, it would be We have all benefited from a fossil fuel highly irresponsible for the land to be used to “ economy, both here in Philadelphia and process fossil fuels again.” around the world, but these cheap fuels have come with a disastrous cost.”

WALTER T., AUGUST 27, 2019 AUDRA W., AUGUST 6, 2019

Overall fossil fuels have been a good thing, but we know that too much of a good thing “ In the area where the refinery is, South can be lethal…and fossil fuels are now lethal.” “ Philadelphia has the highest cancer rates, highest childhood asthma rates…” CHERYL P., SEPTEMBER 9, 2019

CAROL H., AUGUST 20, 2019

23 At the time this report was written, multiple investigations into the incident were ongoing. Until those investigations are thoroughly conducted and concluded, it is impossible to have a full and complete understanding of what led up to the catastrophic explosions that occurred on June 21st. However, in the months since June 21st, City officials have gathered a basic set of preliminary, underlying facts surrounding the incident. What Happened

According to preliminary findings released by the U.S. Chemical Safety and Hazard Investigation Board (CSB), the alkylation units appeared to be operating normally at the Girard Point refinery complex. Then, at approximately 4:00 am, a leak suddenly occurred that led to highly flammable process liquid escaping from the pipes of the alkylation unit and forming a vapor cloud near ground level. This vapor cloud, which was primarily comprised of propane with a low concentration of HF - was visible on security camera footage. Very shortly after the leak began, the vapor cloud ignited and caused a large fire.

PES employees manning a control room quickly stepped into action and activated a Rapid Acid De-inventory (RAD) system that The Incident on was installed previously by Sunoco to rapidly drain the HF in the unit and safely contain it in the event of an emergency. More than 96 percent of the HF known to be on site at the unit was safely June 21st and successfully evacuated from the immediate vicinity of the fire and contained in the RAD drum.

A third, and largest, explosion occurred when a vessel Timeline containing butylene, isobutane, and butane violently ruptured. This explosion appeared to be a secondary event caused by the fire. The explosion caused Philadelphia Fire one 38,000 lb. fragment of the Beginning of During early morning The flammable vapor While the vapor cloud Commissioner and Director vessel to fly over the Schuylkill neutralization process hours, the HF alkylation cloud ignited and continued to burn, an of Emergency Management River, and two other fragments for the HF that was caused a large fire in explosion occurred in Adam Thiel declared the units were reportedly weighing 15,500 lbs. and contained in the RAD the alkylation unit. the alkylation unit. incident “under control.” operating normally. 23,000 lbs. to land onto other system. portions of the refinery site.

June 21 4:00:16 am 4:02:06 am 4:02:37 am 4:15 am 4:19 am 4:22 am June 22 August 7 August 27 September 24

A sudden loss of containment An operator in the control A second The fire was extinguished Neutralization of HF within caused flammable process fluid room activated the Rapid Acid explosion at approximately 8:30 RAD system concluded. to release from an alkylation unit, Deinventory (RAD) system, occurred. a.m. Additional acid neutralization forming a ground-hugging vapor which drained bulk HF from and deinventorying cloud. The process fluid was components of the alkylation activity continued on other primarily composed of propane, unit into a containment drum equipment. along with a comparatively small located further away from the amount of HF. alkylation unit.

(Source: “Factual Update – Fire and Explosions at Philadelphia Energy Solutions Refinery.” U.S. Chemical Safety and Hazard Investigation Board. October 16, 2019.) 24 The Incident of June 21st Seven minutes after the control room operator activated the While there were numerous CML’s located on this pipe RAD system, the ongoing fire caused the first in a series of three circuit, the specific elbow pipe that failed did not have a CML. explosions in the alkylation unit. The third and largest explosion Therefore, while the thickness of the pipe circuit was regularly occurred seven minutes after the first one, when a vessel monitored in other locations, the thickness of this specific elbow containing butylene, isobutane, and butane violently ruptured. pipe was not regularly monitored. According to the CSB, this explosion appeared to be a secondary event caused by the fire. This explosion produced an enormous According to the CSB, recent PES inspection data from 2018 fireball that was widely portrayed in the media and was powerful indicated that the thickness measured at nearby CML’s on the enough to send a 38,000 lb. fragment of the vessel across the pipe circuit (including pipe segments immediately adjacent to the Schuylkill River (a distance of approximately 2,100 feet) and other elbow joint that failed) were well within acceptable standards. For large fragments to crash down on other parts of the refinery site.51 example, measurements taken at multiple nearby CML’s on the same pipe circuit reported thicknesses of more than 0.300 inches The fire was extinguished the following morning on Saturday, in 2018. According to an industry alert from PES, the thickness June 22nd. Thankfully, nobody was killed or seriously injured as a measured on the elbow pipe immediately adjacent to the failed result of the fire or explosions. According to the CSB, five workers elbow measured 0.311 inches. At the time the pipes were first experienced minor injuries during the incident and response and installed, their thickness was 0.322 inches. – indicating relatively neither the CSB nor the City of Philadelphia are aware of any offsite low corrosion rates over more than 40 years in service.55 or onsite health impacts from any HF release.52 However, after the incident on July 21st, it was discovered that the Potential Cause minimum thickness of the unmonitored elbow that failed was just 0.012 inches – just 7% of the minimum acceptable thickness level As noted previously in this report, it is impossible to have a of 0.180 inches and less than the thickness of a credit card.56 full and complete understanding of what led to the incident on June 21st until all pending investigations have been The ruptured elbow pipe and an adjacent elbow both featured thoroughly concluded. At the time this report was written, these the same material specification stamps, and are believed to have investigations remained ongoing. been installed in the same time period. One could conclude, therefore, that the pipe segments should have been made of the However, preliminary findings and factual releases made by the same alloy and would therefore be subject to similar corrosion CSB, as well as industry alerts released by PES, indicate that a levels over time. However, following the incident, testing ruptured 8-inch, 90-degree pipe elbow appears to be what led indicated that the ruptured elbow had a different chemical to the process fluid release that led to the fire and explosions that composition than the adjacent elbow.57 occurred that day. The ASTM A234 WPB material specification in effect when the The process fluid running through the pipe circuit where the pipes were installed did not contain specified maximum content failure occurred was highly flammable and corrosive – comprised levels for nickel or copper. In 1995, these standards were revised of approximately 95% propane, 2.5% HF, and 2.8% other to include a maximum nickel content of 0.40% and maximum hydrocarbons. The pipe circuit appears to have been installed copper content of 0.40%. Following the incident, tests revealed in the early 1970s and both the elbow that failed, as well as that the pipe elbow that failed contained a 1.74% nickel content the adjacent elbow that did not fail, featured the same stamp and a 0.84% copper content – well in excess of the revised 1995 indicating that both pieces were constructed to meet the same specifications – while an adjacent pipe elbow that remained ASTM A234 WPB material specification.53 intact and showed far less corrosion had a nickel content of less than 0.01% and a copper content of 0.02%. The chemical The pipe circuit was routinely tested using ultrasonic technology composition of both the ruptured elbow and the adjacent elbow at specific locations to monitor the thickness of the pipe. These were within the allowable maximum standards (including the designated testing locations were referred to as “condition 1995 revised standards) for all other elements.58 monitoring locations” (CML). According to industry protocols, these pipes were subject to “retirement” when they corroded to Since investigations are ongoing, no final, comprehensive less than 0.180 inches in thickness.54 analysis, conclusions or recommendations have been rendered regarding the full range of factors that contributed to the incident. However, these preliminary facts and findings suggest that this specific elbow joint was not made of the same chemical composition as the other pipe segments on the circuit, the

25 The Incident of June 21st elbow joint that failed contained higher levels of nickel and While the release of any quantity of HF is cause for serious copper than updated standards would permit, and these higher concern, it is important to note that neither City officials nor levels of nickel and copper likely contributed to an accelerated federal agencies have identified any known offsite or onsite rate of corrosion beyond what was measured or anticipated for health impacts from the release: the rest of the pipe circuit.59 • First responders and refinery employees working in Upon discovery of these underlying facts regarding the different close proximity to the site of the incident did not report chemical composition of the failed pipe, PES management any adverse health effects that would suggest they were distributed an industry alert disclosing these known facts and exposed to any significant quantity of HF. recommending that other “refiners with HF alkylation facilities • No air monitors are known by the City to have reliably should consider conducting a one-time thickness measurement recorded elevated HF levels. Though one portable air on all installed piping components in spooled sections of monitor deployed by the City’s Department of Public Health carbon steel piping systems in HF acid service, possibly after the explosion recorded an elevated HF reading, this including positive material identification, to determine whether reading was confirmed to be a “false positive” due to the 60 accelerated localized corrosion is occurring.” meter being improperly calibrated. No other monitors are known to have recorded elevated HF levels migrating Immediate Aftermath off the property, and neither did any air monitors located downwind of the site of the incident. Though the fire was extinguished the following day, significant • Air modeling performed by the Federal Emergency hazards remained present on the site and the extent of Management Agency’s Interagency Modeling and those hazards was not fully known for some time. Due to this Atmospheric Assessment Center (IMAAC), based on the uncertainty, personnel from the Philadelphia Fire Department actual timeline of the incident and the known weather and the Office of Emergency Management - assisted by multiple conditions on site at the time, indicates with high state and federal agencies - remained on site 24 x 7 for more confidence that the vapor cloud that leaked out of the than three months following the incident to ensure public health alkylation unit could not have traveled a far enough distance and safety. During this time, a primary focus of Philadelphia’s first from the site of the leak prior to ignition to have crossed responders was to ensure that the HF that remained on site in the the facility perimeter and posed an external threat to RAD system was stable, contained, and safely monitored until it surrounding communities. Furthermore, the subsequent fire was successfully neutralized. and explosions likely had a significant effect with dissipating and diluting any remaining HF to concentrations well below The leak of process fluid, fire, and series of explosions were levels that would cause health effects.62 substantial and caused a significant release of hydrocarbons from the refinery’s pipes and processing systems. As reported by the CSB, PES estimated that approximately 676,000 pounds On September 24th, following the successful neutralization of hydrocarbons were released during the event and 608,000 of the HF contained in the RAD system and the complete pounds of those were combusted during the fire and explosions. restoration of the air monitoring network on the PES site, the incident was declared “under control” by Commissioner Thiel. Although the vast majority of the HF that PES estimated to By making this declaration, the Commissioner communicated be on site was safely and successfully contained in the RAD that any remaining hazards on the site were understood and system, a comparatively small quantity of HF was present in a believed to be safely contained to the immediate vicinity of the low concentration in some of the process equipment and pipes incident. Once the incident was declared under control, PFD that failed during the incident. As a result, some quantities of HF and OEM ended its 24 x 7 staff presence at the PES facility and were released into the atmosphere. According to the CSB, PES remained in frequent communication with the leadership of estimated that 5,239 lbs. of HF were released from the piping PES and other responding and investigating agencies. The total and equipment. Some of this release (approximately 1,968 costs incurred by the City for all work related to responding to lbs.) was contained by a water spray safety system within the the refinery incident and its aftermath since June 21st totaled alkylation unit and drained to the refinery’s wastewater treatment approximately $1.9 million. plant, where it was processed. The remaining 3,271 lbs. were not contained by either the RAD system or the water spray and was released into the atmosphere.61

26 Present Conditions

The explosions on June 21st seriously damaged the 433 Alkylation Unit and caused PES to stop refining operations at the Girard Point refinery complex. PES continued to operate the neighboring Point Breeze portion of the facility, which was not directly affected by the fire or explosions, until August when the last of the crude oil stored on site was refined. Though PES is no longer refining crude oil and has laid off the majority of its workforce, the company has maintained a small caretaker crew on duty at the refinery to monitor conditions, operate and maintain core systems, safely store and remove millions of gallons of liquids and gases that were still on site, and ensure that the complex remains safe and in a condition that will allow the plant to be restarted in the future following the outcome of the bankruptcy process. Second Bankruptcy Filing

A month after the incident on June 21st, PES filed for Chapter 11 bankruptcy on July 21st for the second time in two years. The filing followed the announcement that PES intended to end refining operations without a restart date planned. However, by filing under Chapter 11, rather than Chapter 7, the company indicated its initial intent to restructure its operations and debts, rather than dissolve and sell the assets to satisfy creditors as would occur through Chapter 7.

Current Status The company’s lenders also agreed to provide up to $100 million in additional financing to operate the company, wind down refinery operations, and position the assets for a sale or restart while the bankruptcy process unfolded. As reported, PES had an insurance policy on its facility that could provide up to $1 billion for property damage and $250 million for loss of business.63

It was widely reported in the news media that PES was soliciting expressions of interest and bids for entities wishing to purchase the refinery assets. As of November 10th, media reports indicated that 15 potential bidders expressed written indications of interest The City of Philadelphia has in acquiring the site.64 However, it remains to be seen what types of businesses emerge offering viable, credible proposals for the entered an appearance in site’s future and those details will not be known until formal bids the bankruptcy proceeding are submitted and the bankruptcy auction, if any, takes place. in order to remain informed The City of Philadelphia has entered an appearance in the bankruptcy proceeding in order to remain informed and and involved in the process involved in the process as it unfolds. On November 14th, 2019, the Bankruptcy Court approved a process for the sale of PES’ as it unfolds. assets. An auction of said assets is currently scheduled for January 17, 2019. If competing bids are received and the auction is held, representatives of the City of Philadelphia will attend and shall consult with PES on the bidders’ proposed future use and

27 Current Status development of the site as appropriate. However, the City is In summary, the Philadelphia refinery no longer received the level just one of many parties in the proceeding and while it is likely of financial advantage it once did from bringing crude by train that the City will be able to exert some influence over aspects of and had to rely more on expensive crude imported internationally. the site’s future through this process, the City will not be able to Meanwhile, the refinery had to continue to pay predetermined dictate who buys the site. contractual fees to its rail yard subsidiary regardless of the volume of train traffic moving through the yard.66 Broader Economic Challenges For the existing refinery complex to be on stronger financial Long before the events of June 21st, the PES refinery was facing footing for the long term, future operators would have to consider significant financial challenges. While some of these financial whether it makes economic sense to either make the capital challenges were internal due to the restrictive financial and legal improvements necessary to process less expensive crude oils; arrangements that existed between the PES refinery operation, consider whether there are new opportunities to bring light, sweet related subsidiaries, and creditors, many of the challenges were crude oil to the facility at a discount to the international import external, structural challenges that would be difficult for any similar market; and consider other options to lower the operating costs independent merchant refinery operator to compete against. and improve the production efficiency of the refinery. Crude Oil Economics Risks to Customer Base

As noted previously in this report, the Philadelphia refinery In addition to experiencing financial challenges from crude oil complex is built to process light, sweet crude oil and produce markets, the Philadelphia refinery is facing challenges from losing mainly fuels. Unless very substantial capital investments are access to portions of its traditional customer base. made, the refinery cannot process less expensive crude oils that have higher sulfur content, or produce a wider range of other Laurel Pipeline: marketable petrochemical products. The Philadelphia refinery complex is connected to major consumer markets in the East Coast through a series of pipelines. The Philadelphia refinery features a state-of-the-art oil train These pipelines allow finished products to efficiently travel to offloading facility, which allowed it to benefit from less expensive where they are consumed. One of these pipelines – the 350- Bakken crude oil for a period of time. At the time this railyard was mile Laurel Pipeline, owned by Buckeye Partners – allowed the built by PES, numerous other refineries in the region – including Philadelphia refinery, as well as other regional refineries and Monroe Energy in Trainer, PA and PBF Energy in Delaware City, importers with East Coast fuel terminals, to ship fuels westward DE, were also developing the rail infrastructure to import crude to markets in Western Pennsylvania. At one point, PES claimed from domestic sources by rail. that 20% of its total production traveled to the Pittsburgh area through this pipeline.67 However, as noted by the U.S. Energy Information Agency, the economics of crude-by-rail depend heavily on the relationship Since at least 2016, however, Buckeye has sought to reverse between prices of domestic and international crude oils. The the direction of portions of the Laurel Pipeline to allow growing discount that once existed between Bakken crude and imported Midwest refineries greater access to Pennsylvania markets at the crude has diminished over time and so has the attractiveness of expense of East Coast refineries. Shortly after the incident on bringing Bakken crude to Philadelphia by train. Meanwhile, new June 21st and the announced closure of PES, Buckeye reached crude oil pipelines have been built to connect the Bakken region a settlement with refiners and retailers to reverse portions of the with other regions like the Midwest and Gulf Coast – allowing pipeline and allow Midwest refineries to ship fuels east through refineries in those regions to tap into this crude oil source the pipeline as far as Altoona, PA. The settlement allows for bi- without paying the cost premium involved with shipping crude directional traffic between Pittsburgh and Altoona until the end by rail to the East Coast, where these pipelines do not exist. of 2024, after which Buckeye could permanently switch the flow Thus, Bakken by rail shipments to the East Coast have declined and end east-to-west traffic at Altoona. substantially from a peak in late 2014.65 However, the settlement also contains language that if pipeline shipments from PES or a successor fall off after 2022, then the agreement would no longer apply through 2024 and Buckeye could petition to use the pipeline exclusively to ship fuels from west to east into Central Pennsylvania.68

28 Current Status Should these terms and conditions continue into the future, and facilities at the Belmont Rack, or enter into strategic partnerships if the flow direction on the Laurel Pipeline is permanently shifted with other renewable fuel producers and blenders. Indeed, to supply Central and Western Pennsylvania markets with fuels prior to the incident on June 21st, PES was actively exploring produced in the Midwest, the Philadelphia refinery and other partnerships to develop a $120 million renewable energy plant at East Coast refineries will face a significant loss of customer base the refinery site that would convert food waste into biogas, which at the expense of rivals in other regions – further hindering their PES would then purchase. This arrangement would have assisted ability to be competitive and economically viable under their PES with meeting its RFS obligations without having to rely on current business models. purchasing as many RINs on the open market in order to do so.71

Changing Maritime Fuel Standards: A wide range of options like these exist for a refinery operator Changing environmental regulations regarding residual fuels to be able to lower its RIN costs and improve compliance with also pose a risk to a portion of the refinery’s traditional customer the RFS, but those options require sufficient capital, time, and base. Commercial shipping vessels have traditionally consumed strategic partnerships to develop. large quantities of heavy fuels that are produced as byproducts of the distillation process. Many of these fuels, such as Number Waning Demand for Gasoline 6 bunker oil, have high sulfur content and generate significant emissions when burned. In addition to potentially losing access to much of its traditional customer base due to pipeline reversals, the Philadelphia refinery Beginning in January 2020, the International Maritime faces long term challenges due to projected declines in demand Organization will mandate that most vessels convert to burning for certain fuels in the years ahead. lower sulfur fuels (or implementing expensive environmental control systems). Whereas the current standards permit fuels with According to IHS MarkIt, demand for gasoline is anticipated a sulfur content as high as 3.5%, the new standards require fuels to peak around 2020 due in large part to increased fuel to have a sulfur content of 0.5% or less. These news standards are efficiency and wider use of electric/hybrid vehicles. These expected to reduce SOx emissions from global shipping by up declines in demand are expected to pressure U.S. refiners to to 77% annually.69 cut production, and East Coast refiners are expected to feel particular pressure due to their comparatively higher operating While positive for environmental health, the adoption of this costs and competition from other supply sources, such as new fuel standard will cause notable disruption in the fuel refineries located in other regions or overseas. IHS anticipates supply system. Refineries, including the Philadelphia refinery, that East Coast refinery capacity utilization – following a decade will have to adapt to the new standards by implementing new of capacity contractions from refinery closures – will continue to technologies and making significant capital investments to decline, from near 90% in 2018 to 30% by 2050.72 Additionally, reduce the sulfur content in the fuels they produce for this there has been a steady decline in the demand for home heating segment of the market or risk losing access to it. oil, which was also produced by the refinery.

RIN Issue Still Unresolved This report does not attempt to present a thorough financial analysis into the viability of the refinery’s business model, As noted previously in this report, the federal Renewable nor does the City have access to PES’ internal financial data. Fuels Standard (RFS) placed a substantial financial cost on the However, based on these (and other) underlying economic Philadelphia refinery. PES’ strategy for complying with the RFS conditions, legitimate questions can be raised as to how by purchasing RINs on the market cost the company a total of economically viable the existing Philadelphia refinery would $832 million over a six-year period between 2012 and 2017 and be in the long term unless substantial and costly upgrades are represented the second largest operating cost to PES by the time made to make the plant more efficient to operate and to diversify it filed for bankruptcy for the first time in 2018.70 its business model into different lines of crude oil feedstocks, consumer products, and renewable fuel production capabilities. Absent any changes to federal policy, the cost of compliance with the RFS may fluctuate from being manageable to deleterious, for any future operator of the Philadelphia refinery site as it is currently configured. However, there are potential paths forward for a future refinery operator to comply with the RFS while reducing these operating costs. For example, PES (or a future refinery operator) could acquire Sunoco’s blending

29 Powers of the City

Throughout the Advisory Group process, City officials have explained the limitations upon the role of City government in determining the future of the refinery site:

• The refinery site is privately owned and controlled. As a result, the City has no legal authority to tell the owner whether to sell some or all of its property, who to sell it to, or what to do with it. Virtually all of the refinery site is zoned I-3 Heavy Industrial, which allows a full range of industrial uses with the fewest restrictions of any industrial zoning district.73 • Zoning changes cannot prohibit a future refinery or mandate a change of use for the site – at least in the short term. The site has been in use as a refinery for more than 100 years, and petroleum-related uses long pre-date the existence of Philadelphia’s zoning laws. As a result, the existing land uses are “grandfathered” in and are allowed to continue in the future. If the property were to be re-zoned in the future to prohibit a refinery or other heavy industry, existing uses would be permitted to continue as “nonconforming uses” – which are uses that were legal prior to the adoption of a zoning ordinance that would render the uses illegal. Under Pennsylvania and Philadelphia law, nonconforming uses may generally continue to operate (and often expand) until the nonconforming use is “abandoned” at the site – regardless of whether the ownership or tenancy of the property changes.74

Potential Reuses Determining whether a nonconforming use has been sufficiently “abandoned” to no longer be grandfathered in is fact specific. In Philadelphia, this requires that the nonconforming use be “discontinued” for more than 3 consecutive years. The law also requires that for the use to be considered “discontinued” for any period of time, there must be evidence that the owner or lessee no longer intends to use the property for that purpose. This evidence may include the owner removing improvements necessary While the City of Philadelphia to support that use, modifying the property to make it unsuitable for that use, allowing required permits or licenses does not have direct control to lapse, or failing to pay taxes related to the nonconforming use. Maintaining necessary licenses, making improvements over the future of the refinery to the property to accommodate the use even when it is not site, it does have some tools actively operating, and efforts to market the property for that use during the time when it was not actively operating may it can use to exert limited all be evidence to prove that the use has not, in fact, been discontinued.75 influence over what happens.

30 Potential Reuses • The refinery site is involved in a bankruptcy approval process to new KOZs. The KOZ designation proceeding. While in bankruptcy, PES retains control of its covering most of the refinery site was approved by the State operations and assets. PES has a fiduciary duty to maximize in November 2013 for a 10-year period beginning January the value of those assets for the benefit of its creditors. PES 2014 through December 2023. As a condition of the is currently engaged in a sale and auction process. Who City’s KOZ application for portions of the refinery site, PES will ultimately be the successful bidder will determine the entered into a Payment in Lieu of Taxes (PILOT) Agreement near-term future for the site. Any sale must be approved by for the 10-year term of the KOZ. That PILOT payment is set the U.S. Bankruptcy Court in Delaware. The Court is likely to at 110% of the real estate taxes (approximately $1.25 million approve the sale if it finds it reflects a reasonable exercise of annually) that would be due if the site had not received PES’ business judgment. The City, although actively involved KOZ designation. The City may submit an application to in the case, is one of many creditors and interested parties the State seeking extension of KOZ benefits subject to and is not in a position to dictate what should happen to PES authorization for specific parcels by both City Council via or to its site – or whether PES should continue as a refinery legislation and the School District of Philadelphia Board of or sell any of its assets to any specific party. The future of Education via resolution. Applications are submitted to the both PES and its assets will ultimately be decided through PA Department of Community and Economic Development the bankruptcy process and by the range of viable bids and for consideration. Any extension of KOZ benefits would be offers that surface through that process. conditioned upon continuance of the PILOT agreement. • Eminent Domain is not a viable near-term option. While the KOZ program is the most robust incentive Upon learning about the limitations of the City’s role in this program at the City’s disposal, the City also has a range of process, some have suggested that the City could exert additional discretionary economic development incentives greater control and influence over the future of the site by it can use to encourage business growth and development condemning it using the power of eminent domain. The City within the City, including Tax Increment Financing (TIF) or and Philadelphia Redevelopment Authority can take title to grants and forgivable loans. These programs can be utilized private property, via eminent domain, through a process to encourage business activities that align with the City’s known as condemnation. Such takings of private property values and vision. can only be done for specified public purposes. However, • Infrastructure Assistance. Much of the 1,300-acre such takings do come with significant costs. refinery site currently exists as large tracts of privately-owned land that are fenced off with relatively few connections to the First, the City and Redevelopment Authority must compensate City’s roadway or infrastructure network. If the future of the the owner of any property that is to be condemned by site is conducive to a range of activities, it is likely that parcels paying the owner fair market value. Second, in condemning of the site may either require subdivision or the construction property, the City and Redevelopment Authority would inherit of additional infrastructure like streets, water, sewer, or river liability for the clean-up of any environmental contamination access to improve connectivity to the rest of the City. Should that exists on any property that is condemned. Both of these this situation occur, the City could leverage its infrastructure issues would be subject to lengthy and time consuming to help support the development of uses that support the litigation, and the total process would likely cost taxpayers City’s values and vision. Should the City decline to assist hundreds of millions of dollars (or more) - funds that the City with building this type of infrastructure, the onus to provide does not have available for this purpose. it would be on the property owner.

Though the City does not have direct control over the future • Targeted Assistance for Specific Initiatives.The City of the refinery site, it does have some tools it can use to exert may also be able to exert influence to encourage certain limited influence over what happens there in the future: uses on the site in a more targeted way than offering tax breaks or building roads. For example, the City has • Economic Incentives. Much of the refinery site is substantial purchasing power that could be leveraged to enrolled in Pennsylvania’s Keystone Opportunity Zone encourage the development of green energy. The City, (KOZ) program, which is designed to encourage business therefore, could enter into a power purchase agreement activity and investment at specific sites that are abandoned, to encourage the development of solar or wind energy vacant, or underutilized. Properties and businesses located on portions of the site, or agree to purchase biofuels for within KOZs pay little to no state and local business taxes use in municipal vehicles. The City can also offer targeted for a defined period of time. KOZ designations can be workforce development assistance through its partner authorized for up to 10 years, although sites that remain agencies like Philadelphia Works to ensure that future users vacant or underutilized may be extended through a similar of the site have access to the trained workforce they require.

31 Potential Reuses Environmental Remediation Issues It is worth noting that the refinery site, at more than 1,300 acres, presents a tremendous opportunity to host a range of As previously noted, the site’s long history in the petroleum uses. There are no other developable sites available in the industry has led to substantial environmental contamination in City that come close to this size. In 2013, the Philadelphia the soil and ground water throughout the site. These conditions Industrial Development Corporation, Philadelphia City Planning will significantly influence the range of activities that are viable or Commission, and the Commerce Department released a master safe on the site. plan for the Lower Schuylkill that envisioned much of the existing refinery site to be utilized to support the energy industry’s growth The site is enrolled in Pennsylvania’s Act 2 voluntary remediation and diversification. The plan also called for nearby areas to be program, which is administered by the PA Department of utilized to support innovation and logistics due to critical links Environmental Protection. Under the terms of the sale of the to highways, railroads, ports, airports, and close proximity to refinery to PES, Sunoco retained liability for dealing with legacy Center City. Regardless of which activities are situated there, the contamination that occurred before the sale in 2012. PES, in existing attributes of the site strongly suggest that the area would turn, is responsible for any contamination that occurred under be an ideal place to anchor a large and regionally significant its ownership. Sunoco created a subsidiary, Evergreen Resource center of employment.78 Management Operations, to address these legacy contamination issues with funding identified to perform the work.76 Site Assets

Remediation plans for the site’s 11 areas of interest are in various The following existing assets are likely to make the site attractive stages of development , and the actual remediation work will for certain future uses: take many years to complete. However, current plans call for most of the refinery site to be remediated to a site-specific • Excellent, high quality industrial infrastructure non-residential standard based on the site’s current and long- that is difficult to find elsewhere. The site contains a standing use as a heavy industrial site. Various technical reports significant amount of petroleum processing equipment, and environmental assessments that have been developed storage facilities, connections to interstate pipelines, and so far in the Act 2 process are available online at https:// related infrastructure. Industrial-scale utilities, including a phillyrefinerycleanup.info and can otherwise be reviewed at PA wastewater treatment plant, rail facilities, and port access, DEP’s Southeast Regional office in Norristown.77 are also present. • Strategic location. The site sits at the crossroads of While the existence of a responsible entity with funds available to two interstate highways and a short drive to Philadelphia deal with legacy environmental issues may be an advantage for International Airport and the City’s major seaport facilities. encouraging expressions of interest in the site moving forward, Much of the site also contains frontage along the tidal these existing conditions also limit what is possible on the site in portion of the Schuylkill River, which is navigable. Pipelines the years ahead. Unless it is decided, and deemed technically connect the site to shipping terminals on both the Delaware feasible, to clean portions of the site to a higher standard, the and Schuylkill Rivers, enabling liquid products to be easily site will likely remain in use primarily for industrial or commercial transported between land and sea. purposes in the years ahead. • Favorable existing zoning. The site’s I-3 zoning What the Future Might Look Like designation is the City’s most permissible industrial zoning category and permits a wide range of industrial uses with minimal restrictions. Though the history and underlying facts around the refinery and its site are complex, the site has advantages that, if maximized, • Access to a large supply of skilled labor. The can ensure that it is used in a way that adds value to the Philadelphia region is home to an enormous workforce, Philadelphia region for many years to come. including skilled trades labor and an existing workforce that is well trained in refinery and heavy industrial operations due Throughout the Advisory Group process, many stepped forward to the industry’s long history in the region. with ideas for what they would like to see happen on the site and what they would absolutely not like to see happen. The opinions and suggestions were wide ranging in their vision as well as their level of economic feasibility. Many agreed, however, that the site should at least be put to some form of productive use.

32 Potential Reuses Site Liabilities and Uncertainties Likely Potential Uses

The site also has some attributes that may hinder or complicate Through the Advisory Group process, IHS MarkIt was consulted redevelopment opportunities: to provide a market analysis to better inform officials about the range of possibilities that are likely to emerge for the refinery site. • Legacy soil and groundwater contamination will Preliminary findings were presented in a public meeting of the limit future uses. The Act 2 remediation process will take Advisory Group on September 9th. Based on an assessment of many years and, at the time of this report, will not remediate overall market conditions, conditions of the site itself, and prior conditions to a level that will support non-commercial experience with similar industrial reuse projects elsewhere, the development. While future owners of the site will not be two entities determined that the following uses were likely to responsible for remediating this contamination, the existing express interest in the site: conditions will limit future development to industrial and commercial uses and may complicate the construction and • Continued petroleum processing. It is likely that some, engineering methods required to build new structures on or all, of the site could be viably maintained for some type the site. of petroleum processing – whether that includes refining • The extent of the fire damage and condition of the or primarily storage and logistics activities. It is important processing equipment. While PES had an insurance to note that the Point Breeze portion of the refinery policy for the unit that was damaged on June 21st, the was unaffected by the incident on June 21st and could ongoing investigations into the incident and the insurance be restarted with minimal effort – and all the necessary claims process will complicate how quickly the Girard Point infrastructure to run a refinery is already in place – but facility could be brought back online. Additionally, the whether doing so would be an attractive or profitable option refinery facility has an extensive amount of infrastructure that, remains a question. However, based on the overall market while maintained over the years, has not been upgraded forecasts and structural issues outlined in this report, it is to the most state of the art technologies due to a lack unlikely that the full, 335,000 barrel/day refinery could of investment from recent operators. These factors may be profitably operated in the same manner in the long influence the viability of any proposals to restart refining term unless substantial investments are made to change its operations in that portion of the facility and encourage a business model. To remain competitive in the long run, the different use or range of uses in that part of the site. refinery would need to be configured to process a wider range of lower cost crude oils, produce a wider range • Flood risk. Sea levels are projected to rise in future years of consumer products, and (absent changes to federal due to climate change, and many moderate scenario regulations) develop renewable production or blending projections from NOAA suggest that large portions of the capabilities to lower its RFS compliance costs. While refinery site in the vicinity of the Schuylkill River Tank Farm these investments are not impossible to make, it remains and Girard Point will experience more frequent and severe a question as to whether any companies or investors are flooding events in the years ahead. Future development willing to step forward and contribute the capital needed to must take these risks into consideration when planning what make it happen. to build, where to build it, and how to build it. • Alternative energy. The site has many pipelines, • Urban location. While proximity to a large population storage tanks, and processing equipment which would center may be advantageous for certain uses, it poses make it an attractive location to produce biofuels or complications for any contemplated uses that involve other forms of renewable energy. The massive footprint dangerous chemicals, emissions, or other activities that of the site leaves abundant room to accommodate solar may pose unacceptable risk levels to the surrounding generation throughout the site without conflicting with the community. Future users of the site must be mindful of how development of other uses. Interest may emerge to take proposals for the site will be received by and interface with advantage of the site’s direct port access for wind turbine the surrounding community. manufacturing, as well. The site’s industrial character may • Pervasive infrastructure on site. While the presence of also be attractive for resource recovery uses, such as tire abundant industrial infrastructure may be advantageous for distillation, syn-gas production, and organic and municipal certain uses, it may also complicate or delay the development waste processing and recycling. of other, non-refinery uses on portions of the site.

33 Potential Reuses • Natural Gas Liquids. Existing energy-related infrastructure Who Ultimately Decides? may make the site attractive for petrochemical industries that need access to ethane and propane. Given the current trajectory of the bankruptcy proceeding, it is • Petrochemical. Existing infrastructure may also support likely that the short-term future of the refinery site will be decided industries centered on the production of ethylene, plastics, when the Bankruptcy Court approves a sale to the successful polypropylene, chemicals, and plastics recycling activity. bidder for the refinery’s assets. However, there are several key factors that will influence the long-term fate of the site, which are • Manufacturing, warehousing, logistics, and outside the control of either the Bankruptcy Court or the City of distribution. The existing zoning, site size, and easy Philadelphia: connections to highways, railroads, port, airport, and customers make the site an attractive location for manufacturing • What does the site’s owner want to do? Both the current activity, warehouses, port activities, and firms that are focused owner and the future owner. on storing items and moving them to market. • What activities and projects can the market justify? What is profitable? • Future owners must have the resources needed to execute their vision. Examples from • Future uses must find ways to be compatible with the existing site conditions – the site’s advantages, as well as its Elsewhere disadvantages. • What is the cost involved in making any necessary Many other large industrial sites have been repurposed to infrastructure changes to upgrade facilities, change systems support the next generation of economic activity, and some to allow different uses, or remove systems? of these examples may help predict what the site may look like in the future:

Marcus Hook, PA: Former Sunoco oil refinery repurposed into the Marcus Hook Industrial Complex and Keystone Industrial Port Complex. Serves as a Natural Gas Liquids hub, where products from the Marcellus Shale region arrive by pipeline and are shipped to consumer markets, including through export. Given the current trajectory of the Paramount, CA: Former refinery converted to produce renewable diesel and jet fuels. bankruptcy proceeding, it is likely

Le Mede, France: Former refinery now includes a biofuel that the short-term future of the refinery, an 8-megawatt solar farm, a petrochemical plant, a logistics and storage hub, and a training center. refinery site will be decided when

Dartmouth, Nova Scotia: Refinery that closed in 2013 was the Bankruptcy Court approves a converted into a marine terminal operation. sale to the successful bidder. Shell Haven, England: Refinery closed in 1999, was redeveloped into a container port, business center, and storage/distribution facilities.

Sparrows Point, MD: Former steel plant is currently being redeveloped for logistics and manufacturing.

34 Guiding Values

Through this Advisory Group process, City officials have learned a lot about how different groups of people feel about the refinery site and what they would like to see for its future. At this point, nobody truly knows what the future will specifically look like in the short or long term – those proposals will emerge through the ongoing bankruptcy process. However, based on what we have heard and learned throughout this process, we can define and put forth a series of values that can shape how, and under what conditions, the City responds to future ideas and proposals for the site.

Based on what was learned since June 21st and through the Advisory Group process, the City should favor and encourage a future for the refinery site that:

1. Puts the public’s safety as a top priority. Risks and hazards to the public should be minimized to the greatest extent possible in every aspect of how the site is used. 2. Has a more positive impact on public health and the environment than the status quo ever had. Air, soil, and groundwater pollution from the site should be minimized and remediated and operations should be more environmentally friendly than ever before. 3. Provides significant long-term economic benefit to Next Steps/ Philadelphia and its residents, including through high quality, family sustaining jobs. The site should be put to a productive use that is financially viable and creates high Moving Forward quality employment opportunities. 4. Provides direct community investment and engages meaningfully with surrounding communities. Future users should work collaboratively with surrounding neighborhoods to ensure that there is openness, transparency, trust, and positive impacts across the fence line – including through community benefits agreements or targeted job training or hiring initiatives. Future users should listen and respond to community concerns. Through this Advisory 5. Provides for diverse uses/activities on the 1,300+ acre site. Group process, City officials Regardless of how it is used in the future, the site is large enough to accommodate more than one use. The site’s size have learned a lot about should be utilized to support as many economically, socially, and environmentally positive activities as possible. how different groups of Though the City lacks direct power over determining the future of the site, the City will likely be able to exert some level of people feel about the influence over specific aspects of the site’s future - whatever that future may be. For example, there may be economic incentives, refinery site infrastructure enhancements, or other resources that the City

35 Next Steps/Moving Forward Philadelphia Air Monitoring Network as may be called upon to provide for the site in the years ahead to assist with its future development. To what of July 1, 2019 extent the City responds to any such requests should be determined by whether, and to what extent, the future uses support the values set forth by the City.

These five values respond to the major concerns and incorporate the common themes that emerged from every stakeholder group throughout this process, and can help ensure that the City responds to whatever future proposals emerge for the site in a manner that will further the public interest – of making sure that the site, first and foremost, is cleaner and safer than it was in the past while still making positive contributions to Philadelphia and its residents. Specific Recommendations

While the City is not using this report or process to make recommendations for what the future use or uses of the site should or should not be, the information gathered through this process and after the events of June 21st have helped to highlight some specific areas where the City can make improvements to its operations and regulations. Feedback received through the Advisory Group process has also helped define some specific recommendations that the City, as well as the future occupants of the site, should consider regarding how the site could be positioned to improve its impact on the environment and surrounding community – regardless of what the future range of uses will be on the site. Review Air Monitoring Capabilities

The City of Philadelphia, through the Department of Public Health’s Air Management Services division (AMS), administers and enforces air pollution regulations within City limits. AMS operates and maintains a network of 10 stationary air monitoring stations located throughout the City. Each monitoring station is configured to measure a different series of pollutants. This monitoring network is designed to present a comprehensive, citywide view of air pollution levels.

36 Next Steps/Moving Forward Overall, Philadelphia’s air quality has improved significantly over However, despite this progress, the City has room to improve the years as various environmental standards were tightened, use the monitoring of air quality to ensure that the City is better of cleaner fuel sources expanded, and heavy industry declined. prepared to quickly identify hazards and protect people from Since the start of the 21st Century, the average annual PM2.5 them. Accordingly, the City should: levels have declined in the city by nearly 50% and ozone levels, while still higher than the recently lowered federal air quality • Ensure that if the refinery site remains in use as a refinery or standard, have also declined significantly. other heavy industry that generates emissions, then the site should be required to have a robust air monitoring network that provides data to City officials. The monitoring should include measurements of any hazards posed specifically by the operations of the site. Trends in Annual PM2.5 (Fine Particles) • Evaluate whether it is feasible to make the data from the City’s air monitoring network available, in real time, to the public and government officials to otherwise enhance the 20 20 city’s response to air pollution incidents and releases. 18 18 • Review the locations of the City’s current air monitors to 16 16 determine if they continue to be appropriately located and 14 14 configured to provide a comprehensive picture of air quality 12 12 in the City as required by EPA. 10 10 • Determine whether existing air monitors that are part of the 8 8 City’s air monitoring network can detect/monitor specific

Concentration (ug/m3) Concentration 6 6 hazardous chemicals, like HF, that are being used in the various industrial facilities that would pose a particular risk 4 4 to public health if they are released in significant quantities. 2 2 Steps should be taken to enhance air monitoring capability, 0 0 where appropriate, to monitor for specific known risks near

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 specific sites.

Min Average Max Annual NAAQS (12 ug/m3) Increased Oversight of Hydrofluoric Acid (HF) and Other Chemicals

Trends in Yearly Ozone The City of Philadelphia and the CSB are unaware of any offsite or Ozone Design Value at NEA onsite health impacts reported from the HF release that occurred from the incident on June 21st.79

0.12 According to air modeling performed by IMAAC, there is

0.10 no indication that any significant quantity of HF crossed the refinery’s property line, and no evidence to suggest that 0.08 any members of the public, PES personnel, or emergency responders were exposed to hazardous HF levels.80 0.06 However, the incident on June 21st and subsequent releases

Design Value (ppm) Design Value 0.04 of information and news coverage drew renewed, widespread attention to both the dangers of HF and the presence of large 0.02 quantities of HF at oil refineries throughout the nation.

0.00 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Design Value 2008 Standard (0.075 ppm) 2015 Standard (0.070 ppm)

37 Next Steps/Moving Forward safety systems were installed by Sunoco years before the incident and were put to the test on June 21st. Had those systems not What is HF? been in place, it is likely that the outcomes from the incident would have been far worse. Hydrofluoric Acid (HF) is the term commonly used to refer to hydrogen fluoride that is dissolved in water. Hydrogen Despites its known hazards to human health, HF is commonly fluoride can also exist as a colorless gas or as a fuming liquid. used in industrial applications – though typically in much smaller quantities and/or lower concentrations. However, its use at oil According to the Centers for Disease Control and Prevention refineries pose a particularly significant risk since refineries tend (CDC), HF poses an immediate danger to human life and to have large quantities of HF on site and that by their very nature health at concentrations of 30 parts per million (ppm). oil refineries are vulnerable to fires, explosions, and other failures that may lead to large releases and catastrophic exposure to this When HF comes into contact with skin, it penetrates the skin dangerous chemical. and damages deep tissue layers and bone – and fatalities have been reported from HF skin exposure to as little as 2.5% Between February 18th, 2015 and June 21st, 2019, three U.S. of body surface area. If inhaled, HF can damage lung tissue refineries experienced catastrophic incidents that threatened and cause swelling and fluid accumulation in the lungs that significant releases of HF – at Torrance, CA., Superior, WI., and can become fatal. Philadelphia. Following the first two incidents, in April 2019 the CSB called upon the EPA to review studies it performed in HF has the potential to form a vapor cloud that travels close 1993 to determine whether existing refinery risk management to the ground. In the event of an outdoor release of HF, plans were sufficient to prevent HF releases, as well as determine recommended precautions involve limiting exposure by whether there are other commercially viable technologies that either sheltering in place indoors or evacuating the area if refineries can use in the alkylation process that are inherently doing so does not create an exposure risk.81 safer than HF.86

In addition to the concerns raised by the CSB, organized labor has advocated for the adoption of safer technologies in the Nationwide, more than 40 refineries – including the Girard refining industry. Though there have been no known fatalities Point portion of the PES refinery, as well as nearby refineries in caused by an HF release in the U.S., minor releases of HF have Trainer, PA and Paulsboro, NJ – use HF as a catalyst during the occurred numerous times and have resulted in serious injuries alkylation process. The other dominant technology in use by to refinery workers. In 2009, a release of 22 pounds of HF at the refineries for this activity utilizes sulfuric acid, which is used in Philadelphia refinery sent 13 workers to the hospital.87 The United the Point Breeze refinery complex.82 The two technologies are Steelworkers has raised concerns over the dangers posed by HF not interchangeable without substantial capital investment, and what the union has felt are shortcomings in refinery safety and alkylation units designed to use sulfuric acid as a catalyst systems and procedures, and has advocated that the industry generally require much larger quantities of sulfuric acid to be end the use of HF and replace it with safer alternatives.88 purchased and delivered to the site than HF units.83 Sulfuric acid is often considered a less significant hazard to surrounding Though a declining number of U.S. refineries use HF, it remains communities due to its tendency to form a liquid (not a vapor in widespread use in the refining industry – including at cloud) when released. However, exposure to sulfuric acid can numerous refineries that are located in densely populated areas. still cause many health effects at concentrated levels, including As reported in The Philadelphia Inquirer, a risk management plan damage to eyes, skin, teeth, and lungs – and can be fatal.84 filed by PES with federal regulators in 2017 suggested that in a Refineries utilizing sulfuric acid often require a much greater “worst case” scenario at the Philadelphia refinery involving the volume and frequency of shipping traffic than HF, leading to a loss of 71 tons of HF, a gas cloud could travel up to seven miles heightened risk of accidents during transportation. in 10 minutes – a radius that is home to 1.1 million residents in Pennsylvania and New Jersey.89 According to the CSB, the bulk HF used at PES contained an additive intended to reduce its volatility in the event of a Moving forward, the City should closely evaluate its legal release.85 The PES refinery was also equipped with a rapid abilities to further regulate HF (and other hazardous chemicals) acid de-inventorying (RAD) and water deluge systems to further in a way that minimizes the level of risks posed to surrounding manage risks and dangers associated with HF. These critical communities. The focus of review should center on the chemicals and concentrations that pose the greatest risks to health and are

38 Next Steps/Moving Forward subject to Risk Management Plan requirements under the Clean The PES incident highlighted a gap in the PFD’s ability to Air Act. Under existing federal laws, the EPA and OSHA have the handle multiple hazmat incidents simultaneously – an issue the authority to enact regulations restricting or prohibiting the use of Department has run into on multiple occasions even before the HF in oil refineries.90 A petition calling for a ban on HF use in oil PES incident. The engine and ladder assigned to the Hazmat refineries was under consideration by EPA.91 That petition was Task Force could be responding to a fire when a hazmat denied as facially incomplete on November 12, 2019. It is not incident occurred, which would lengthen response times as currently known if the petition will be corrected and resubmitted. they disengage the fire and respond to the hazmat incident or However, neither the EPA, OSHA, nor any other federal regulatory vice-versa. With the long-term response needed for the refinery agencies have enacted further restrictions on the use of HF despite incident, the Department had to adapt, standing up the hazmat being urged to do so by numerous advocacy groups. unit to be on-site at all times until the incident was put “under control” months later. During and following the incident, the In the absence of explicit federal or state regulation of HF use, Hazmat Task Force operated as a stand-alone unit, able to any regulation of HF by the City would be performed via either respond to hazmat incidents without the worry of being tied up an amendment to The Philadelphia Code by City Council, or with a fire-related event. These changes ensure that the residents as a regulation promulgated by the City’s Air Pollution Control who are served by a fire suppression resource (Engine 60 and Board.92 It is important to note that while the refinery complex Ladder 19) will not lose that capability when these units are is the largest user of HF within City limits, it is not the only user – committed to a hazmat response. and its application in other uses may not pose the same level of risks as a refinery. For example, the other identified users in the While the PES site is the largest and most public example of City have much smaller quantities and concentrations of HF on a heavy industrial site that uses toxic chemicals, many other premises and have fewer risk factors present in their operations locations in Philadelphia have dangerous chemicals on site. that might lead to an accidental release. The City should carefully review its hazardous materials response and its capacity to respond to multiple, simultaneous The City should closely and carefully consider a regulatory events. Additionally, an analysis of the Office of Emergency framework for HF and other hazardous chemicals that first and Management’s hazardous material planning is appropriate. This foremost minimizes risks to the public. In doing so, it is important analysis should include a focus on ensuring that public education to understand the full range of current users of these chemicals, and awareness in communities near sites with hazardous material the context in which they are used, the availability and feasibility risks is effective so people are better prepared and more familiar of safer alternatives, and the full range of strategies that can be with the precautions they should take in the event of an incident. used to minimize any exposure risk to these chemicals (as well as the limitations of those strategies). For these and other reasons, Improve Environmental Impacts of the Site if the City did decide to further regulate HF it would seem most appropriate to do so through the City Council legislative process. Regardless of what the future use or range of uses will be for the refinery site, steps should be taken to encourage the site to have Review HazMat Response Capabilities a more positive impact on the environment than it has in the past.

In addition to exploring additional regulations around HF and Develop Clean and Renewable Energy: other hazardous materials, the City should carefully and critically A consistent theme raised by the public through the Advisory review its existing planning and response capabilities around Group process was a desire to see the large site utilized to hazardous materials more broadly. Prior to the incident on June encourage the development of clean and renewable energy. 21st, the Philadelphia Fire Department’s (PFD) Hazmat Task While the range and scope of those ideas varied, given the Force operated using two separate fire companies. This task sheer size of the site it is highly probable that some level of this force was staffed by personnel from an engine (foam pumper), technology can play a significant role – even without displacing a ladder, and a hazmat laboratory and extinguishing agent, any existing uses. with 9 personnel trained and available to respond to hazardous materials incidents.

39 Next Steps/Moving Forward According to a preliminary concept provided to the City by Solar Plan for Climate Resilience States based on satellite images and parcel sizes, the footprint of the existing refinery complex will likely be able to accommodate The sprawling refinery site is directly adjacent to the Schuylkill a solar power system in excess of 34 megawatts - enough River just upstream from where it enters the Delaware River. Both to power 34,000 homes - utilizing roofs and parcels that are rivers are tidal and commercially navigable to the Atlantic Ocean. currently unoccupied by tanks or structures. Potential may also The refinery site is generally very low in elevation and, prior exist in certain areas to support wind energy – and numerous to being industrially developed, was home to extensive tidal ideas surfaced through the Advisory Group process to utilize the marshes. These attributes make the site vulnerable to flooding site’s large footprint and immediate access to a tidal waterway to and sea level rise. manufacture components for offshore wind generation since many of these components are too large to efficiently transport on land. According to projections by the U.S. National Oceanographic and Atmospheric Administration (NOAA), portions of the refinery Regardless of the specific use of the refinery site in the future, site are currently vulnerable to minor flooding during extreme attention should be paid to encourage the development of high tides – particularly the areas near Girard Point and west of clean and renewable energy to the greatest extent possible. the Schuylkill River. In a future scenario with mean higher high Such technology can take advantage of the sheer size of the site, water (MHHW) increasing by just 2 feet over current levels, can be adapted to be compatible with a range of uses, and can portions of the tank farm west of the Schuylkill River become position the site to once again be on the cutting edge of energy inundated. Increases of 3 feet over current levels are projected technology similar to when it was first developed in the 1860s. to significantly inundate large portions of the Girard Point section of the refinery – with flooding risks and impacts increasing with Enhanced Pollution Control: projected sea level increases.93 The City should evaluate its existing air pollution regulatory framework to ensure that regulations are effectively enforced to Future uses of the refinery site – regardless of what those uses ensure public health and safety. Many of AMS’ regulatory powers are – must seriously plan for these scenarios when determining are delegated to the City of Philadelphia from state and federal what types of infrastructure should be built, as well as where and agencies, and AMS’ role is primary aimed at inspection and how that infrastructure should be built on the site to minimize enforcement. However, City leaders should evaluate whether, risks posed by flooding. Careful attention should also be paid and how, these activities can be further strengthened within the throughout the environmental remediation process on the site to existing legal framework. ensure that soil and groundwater contaminants are addressed in a way that minimizes the risks of contaminants migrating off-site Continued Wastewater Treatment Activities: in the event of more frequent and more severe flooding events. The refinery site currently operates its own wastewater treatment If the site remains in use as a refinery, existing infrastructure and facility to convey, clean, and process stormwater from the overall operations should be evaluated and adjusted (if necessary) to site. This treatment system is critically important to reducing the ensure that more severe and frequent flooding events do not flow of pollutants into nearby waterways and preventing those result in environmental damage. pollutants from entering the City’s infrastructure. Additionally, Sunoco installed and operates systems to pump and treat More broadly, the City should develop a more robust planning groundwater contamination. The future of the site should include effort to ensure that development citywide occurs with climate plans to continue operations of both treatment systems to ensure resiliency in mind. Many of Philadelphia’s prime development that the site’s pollutants can continue to be safely contained and sites exist along waterways- including, for example, areas in treated on-site, thereby minimizing impacts on rivers and City Manayunk, near Penn’s Landing, and the Navy Yard. Despite systems. the risks posed by flooding events in many of these sites, developers continue to pursue projects in these areas and these projects are often based on current conditions rather than on future projections for weather patterns decades in the future and beyond today’s financial horizon. Risks posed by future conditions, however, must be more thoughtfully considered and centrally coordinated in the present to ensure that the safety and resiliency of the building’s future occupants are protected many years after the current project developers are gone. Further regulations on development in the floodplain, therefore, should be developed that are based on future projections for both sea

40 Next Steps/Moving Forward level rise and increased flooding events caused by precipitation. Additionally, public enhancements can be made along portions These regulations must consider, at a minimum, methods to of the refinery site that adjoin the Schuylkill River. In recent years, mitigate the impacts of more frequent and severe flooding the Schuylkill River Development Corporation has built and events on structures and their occupants. Regulations should also extended a trail along the river with significant public and private consider mitigating any existing environmental hazards on a site financial support. This trail is very heavily used and allows the to ensure that increased flooding events do not worsen those public to travel from Christian Street to beyond Valley Forge conditions. Development standards should also prioritize energy along active and abandoned rail lines, as well as along structures efficiency and other technologies to ensure that buildings are built over the water. Subsequent phases of the trail project are minimizing their negative impacts on the climate while also being either under construction or in development and would extend more resilient to withstand anticipated impacts at the local level. the trail south of its current terminus at Christian Street and across the Schuylkill River to Bartram’s Garden. Landscaping, Beautification, and Public South of Bartram’s Garden, much of the Schuylkill waterfront on Amenities both sides of the river is part of the refinery complex. While this portion of the river has a heavily industrial character, much of this Though the refinery complex has a heavily industrial character, it property is under-utilized by refinery operations and is off-limits also sits at a major crossroads and point of entry to Philadelphia. to the public. The Lower Schuylkill Master Plan released in 2013 Travelers heading to and from Philadelphia International Airport anticipated the southerly extension of the trail along the western and the sports complex pass directly by the refinery complex edge of the river, near the existing tank farm, toward Fort Mifflin. on adjacent streets and highways, and travel over much of the Future uses and owners of the refinery site should consider complex on elevated bridges that carry Philadelphia’s two major providing easements or access along the river to accommodate interstate highways high above the Schuylkill River. Additionally, these planned future extensions of the trail southward– which tens of thousands of residents live near the refinery and are would greatly enhance the accessibility and connectivity of this subject to frequent odors and emissions coming from the facility. valued public amenity.

Refineries and heavy industrial sites are inherently difficult neighbors. However, the negative impacts associated with these types of uses can be softened through some strategic investments to green and beautify the landscape in places where visitors and residents interface with the fence line.

Philadelphia has long been conscious of the negative image that these conditions may portray to visitors to the City. Since 1989, the Pennsylvania Horticultural Society has worked with government agencies and adjacent railroad and refinery operators to improve landscaping along the 26th Street corridor – a major travel thoroughfare between the Airport and Center City. Native trees, grasses, and wildflowers were lushly planted to soften the edges between pavement, chain link fence, and tank farms. The existing conditions around the site provide many more opportunities to further pursue and enhance this beautification model. The City should strongly encourage future owners of the refinery to continue pursuing – and enhancing – these efforts to improve how the site interacts with surrounding communities, as well as improve how the site is perceived and viewed by Philadelphia’s residents and visitors.

41 Through the Advisory Group process, City officials have gathered a wide range of information and perspectives on the refinery site from many different stakeholders. Though the near-term future of the site is not known at the time of this report’s publication, the information gathered through this process has helped both the public and City officials to better understand the underlying issues and concerns regarding the Conclusion site. This information, as well as the values and recommendations contained in this report that were shaped by this information, will be utilized to help City decision makers evaluate and appropriately respond to the full range of possible uses that emerge for the site. These values will also better define the conditions through which the City and other public entities should approach and evaluate proposals for the site’s future, to ensure that those uses support the broader public interest and lead to a future that is cleaner, safer, and healthier than our past.

42 Acknowledgments

Co-Chairs Brian Abernathy and Adam Thiel are grateful for the support of many who made the work of the Refinery Advisory Group possible. Special thanks to the members of the Advisory Group who dedicated their time and energy to make sure that the perspectives of all key stakeholders – including those most directly impacted by the refinery and the aftermath of the incident - were brought forward and heard. The Co-Chairs also extend their thanks and appreciation to Preparatory Charter School for graciously accommodating and hosting the public meetings.

In addition, the Co-Chairs wish to express gratitude to the dedicated workers of the PES refinery and emergency responders who went above and beyond the call of duty to protect the health and safety of the public during the incident on June 21st and the weeks following. These skilled and well-trained individuals quickly stepped forward in a moment of crisis and successfully contained hazards and minimized risks and dangers to the surrounding communities. Unfortunately, many of these heroes received layoff notices as a result of the incident and will face challenges finding similar employment opportunities elsewhere in the region.

Finally, Co-Chairs Abernathy and Thiel extend their thanks and appreciation to the members of the public who attended the 6 public meetings of the Advisory Group, as well as those who shared their thoughts and perspectives with the City throughout this process.

Members of the Refinery Advisory Matt Cabrey Anton Moore Group Executive Director, Select Greater Unity in the Community Co-Chairs Philadelphia Irene Russell Brian Abernathy Ed Hazzouri Friends of Stinger Square Managing Director, City of Philadelphia Chairman, Hazzouri and Associates LLC Claudia Sherrod Adam Thiel Denis O’Brien Point Breeze Civic Leader Fire Commissioner and Director of Senior Executive Vice President, Exelon Ethel Wise Emergency Management, City of Utilities Wilson Park Resident Council Philadelphia Anna Shipp Executive Director, Sustainable Business Labor and Employment Members Government Members Network of Greater Philadelphia Mark Lynch Harold Epps Jerry Sweeney International Brotherhood of Electrical Director of Commerce, City of Philadelphia Chairman, Philadelphia Regional Port Workers Anne Fadullon Authority Ryan O’Callaghan Director of Planning and Development, City Craig White United Steelworkers Local 10-1 of Philadelphia President and CEO, Philadelphia Gas Works Jim Snell Dr. Thomas Farley Steamfitters Local 420 Academic and Environmental Health Commissioner, City of Philadelphia Tony Wigglesworth Members Christine Knapp Philadelphia Area Labor Management Director of Sustainability, City of Philadelphia Peter DeCarlo Committee Rich Lazer Associate Professor, Drexel University Deputy Mayor for Labor, City of Philadelphia Mark Alan Hughes Advisory Group Staff Patrick Patterson Founding Faculty Director, Kleinman Center Javon Davis Southeast Regional Director, Pennsylvania for Energy Policy, University of Pennsylvania Assistant Deputy Commissioner, Philadelphia Department of Environmental Protection Christina Simeone Fire Department Sam Robinson PhD Student, Colorado School of Mines/ Patrick O’Neill Deputy Chief of Staff, Office of the Governor National Renewable Energy Laboratory Divisional Deputy City Solicitor, City of Philadelphia Law Department Aliyah Stanger Southeast Regional Director, Pennsylvania Community Members Christopher Rupe Department of Community and Economic Jody Della Barba Deputy Managing Director, City of Development Girard Estates Area Residents Philadelphia Managing Director’s Office Otis Bullock, Jr. Business Members Diversified Community Services Anne Bovaird Nevins Donna Henry Chief Strategy and Communications Officer, Southwest CDC Philadelphia Industrial Development Shawn Jalosinski Corporation Sports Complex Special Services District 43 Sources

1Simeone, Christina. “Beyond Bankruptcy: The Outlook for Philadelphia’s Neighborhood 28McGurty, Janet. “Pennsylvania sees bigger toll from refinery closings.” Reuters, March Refinery.” Kleinman Center for Energy Policy, University of Pennsylvania, September 13, 2012. https://www.reuters.com/article/pennsylvania-economy-refineries/update-1- 2018, p. 8, https://kleinmanenergy.upenn.edu/paper/beyond-bankruptcy; Hein, pennsylvania-sees-bigger-toll-from-refinery-closings-usw-idUSL2E8EDHH920120313. Carola. “Refineries (Oil),” The Encyclopedia of Greater Philadelphia, 2016, https:// 29Ibid. philadelphiaencyclopedia.org/archive/refineries-oil/ 30Pennsylvania Office of the Governor. “Pennsylvania Governor Corbett Speaks During 2Ibid. Philadelphia Energy Solutions Celebration.” Press Release, September 19, 2012. https:// 32018 demographic estimates from Esri “Popular Demographics in the United States” data www.prnewswire.com/news-releases/pennsylvania-governor-corbett-speaks-during- set, updated July 1, 2019. philadelphia-energy-solutions-celebration-170336936.html 4In addition to gasoline, diesel, and heating fuels, the refinery produces and markets jet fuels, 31U.S. Energy Information Administration. East Coast and Gulf Coast Transportation Fuels kerosene, propane, propylene, butane, cumene, and sulfur. Markets. February 3, 2016. https://www.eia.gov/analysis/transportationfuels/padd1n3/ 5Simeone 8 32U.S. Energy Information Administration. East Coast (PADD 1) Operable Crude Oil Distillation Capacity. Accessed November 6, 2019. https://www.eia.gov/dnav/pet/hist/ 6Simeone 9 LeafHandler.ashx?n=PET&s=MOCLEP12&f=M 7Simeone 9 33U.S. Energy Information Administration. East Coast (PADD 1) Product Supplied of Finished 8Simeone 9-10 Petroleum Products. Accessed November 6, 2019. https://www.eia.gov/dnav/pet/hist/ LeafHandler.ashx?n=PET&s=MTPUPP12&f=M 9Simeone 10; Declaration of Jeffrey S. Stein, Chief Restructuring Officer of the Debtors, in Support of Chapter 11 Petitions and First Day Motions at Exhibit B, In re PES Holdings, LLC, et 34U.S. Environmental Protection Agency. ECHO - PES Energy Solutions, Air Toxic Release al.: Case No. 19-11626 (Bankr. D. Del. July 21, 2019), Docket No. 32. Inventory (2014-2018). https://echo.epa.gov/air-pollutant-report?fid=110000336994 10Warner, Dave. “Train hauling crude oil derails on Philadelphia bridge.” Reuters, January 35Philadelphia Department of Public Health. “Air Quality Monitoring in Philadelphia.” 20, 2014. https://www.reuters.com/article/us-usa-derailment-pennsylvania/train-hauling- Presentation from August 27, 2019 Refinery Advisory Group meeting. crude-oil-derails-on-philadelphia-bridge-idUSBREA0J1GO20140120 36U.S. Environmental Protection Agency. ECHO - PES Energy Solutions, Air Toxic Release 11Simeone 10 Inventory (2011-2018). https://echo.epa.gov/air-pollutant-report?fid=110000336994 12Renshaw, Jarrett. “PES to begin operating benzene terminal in Nov.” Reuters, 37City of Philadelphia AMS NOVs Dated July 29, 2013; October 29, 2014; April 23, 2015; October 21, 2014. https://www.reuters.com/article/refinery-philadelphia-benzene- May 14, 2015; September 29, 2016; March 20, 2018; and August 20, 2019. idUSL2N0SG15K20141021 38City of Philadelphia AMS NOVs Dated July 29, 2013; October 29, 2014; April 23, 2015; 13Simeone 11 May 14, 2015; September 29, 2016; March 20, 2018; and August 20, 2019. 14U.S. Energy Information Administration. East Coast (PADD 1) Receipts by Rail from 39Testimony of Dr. Marilyn Howarth before the Refinery Advisory Group. August 27, 2019. Midwest (PADD 2) of Crude Oil. https://www.eia.gov/dnav/pet/hist/LeafHandler. 40U.S. Environmental Protection Agency. EPA Environmental Justice Mapper, 2014 NATA ashx?n=PET&s=ESM_EPC0_RAIL_R10-R20_MBBL&f=M Respiratory Hazard Index, https://ejscreen.epa.gov/mapper/ 15U.S. Environmental Protection Agency. Overview for Renewable Fuel Standard. https:// 41U.S. Environmental protection Agency. EPA Environmental Justice Mapper, 2014 NATA www.epa.gov/renewable-fuel-standard-program/overview-renewable-fuel-standard Cancer Risk, https://ejscreen.epa.gov/mapper/ 16U.S. Environmental Protection Agency. RIN Trades and Price Information. https://www. 42Philadelphia Department of Public Health. “Air Quality Monitoring in Philadelphia.” epa.gov/fuels-registration-reporting-and-compliance-help/rin-trades-and-price-information Presentation from August 27, 2019 Refinery Advisory Group meeting. 17Simeone 12 43U.S. Environmental Protection Administration. Outdoor Air Quality. https://www.epa.gov/ 18Simeone 10-11. report-environment/outdoor-air-quality 19Simeone 11 44Testimony of Dr. Marilyn Howarth before the Refinery Advisory Group. August 27, 2019. 20Simeone 11 45Ibid. 21Maykuth, Andrew. “Court approves Philadelphia Energy Solutions’ bankruptcy plan.” The 46Auchincloss, Amy, et al. “Statement on the Health Effects of Refineries and Implications for Philadelphia Inquirer, March 26, 2018. https://www.inquirer.com/philly/business/energy/ the S. Philadelphia Refinery.” October 28, 2019. us-bankruptcy-court-philadelphia-energy-solutions-plan-20180326.html 47Simeone 36-37 22Simeone 5 48U.S. Chemical Safety and Hazard Investigation Board. “Factual Update: Fire and Explosions 23Pennsylvania Office of the Governor. “Pennsylvania Governor Corbett Speaks During at Philadelphia Energy Solutions Refinery,” October 16, 2019, p. 1. Philadelphia Energy Solutions Celebration.” Press Release, September 19, 2012. https:// 492018 demographic estimates from Esri “Popular Demographics in the United States” data www.prnewswire.com/news-releases/pennsylvania-governor-corbett-speaks-during- set, updated July 1, 2019; Maykuth, Andrew. “S. Philly refinery blast released 5,000 pounds philadelphia-energy-solutions-celebration-170336936.html of a deadly chemical, federal investigators say.” The Philadelphia Inquirer, October 16, 2019. 24“Preliminary Analysis of the Economic Impacts of the PES Refining Complex.” Econsult https://www.inquirer.com/business/deadly-chemicals-philly-refinery-explosion-fire-new- Solutions, September 9, 2019. findings-20191016.html 25Simeone 9 50Simeone 37 26“Philadelphia is strong enough to overcome the closures of Hahnemann and the refinery. 51Maykuth, Andrew. “S. Philly refinery blast released 5,000 pounds of a deadly chemical, It has to.” The Philadelphia Inquirer. June 30, 2019. https://www.inquirer.com/opinion/ federal investigators say.” The Philadelphia Inquirer, October 16, 2019. https:// editorials/hahnemann-hospital-refinery-philadelphia-energy-solutions-pes-closing- www.inquirer.com/business/deadly-chemicals-philly-refinery-explosion-fire-new- jobs-20190630.html findings-20191016.html 27 “Philadelphia refinery owner files for bankruptcy again.” Delaware County Daily Times, 52U.S. Chemical Safety and Hazard Investigation Board. “Factual Update: Fire and Explosions July 23, 2019. https://www.delcotimes.com/business/philly-refinery-owner-files-for- at Philadelphia Energy Solutions Refinery,” October 16, 2019, p. 7. bankruptcy-again/article_9245dd16-aca6-11e9-acac-531974dbfe4a.html 53Ibid.

44 54U.S. Chemical Safety and Hazard Investigation Board. “Factual Update: Fire and Explosions 79U.S. Chemical Safety and Hazard Investigation Board. “Factual Update: Fire and Explosions at Philadelphia Energy Solutions Refinery,” p. 9. at Philadelphia Energy Solutions Refinery,” p. 7. 55Philadelphia Energy Solutions. Industry Alert – HF Alkylation Corrosion. 80IMAAC Technical Operations Hub. “Potential Off-Site Hazard from Hydrogen Fluoride Releases from PES Facility, 21 Jun 2019.” October 21, 2019. 56U.S. Chemical Safety and Hazard Investigation Board. “Factual Update: Fire and Explosions at Philadelphia Energy Solutions Refinery,” p. 9. 81U.S. Environmental Protection Agency. Facts About Hydrogen Fluoride (Hydrofluoric Acid). https://emergency.cdc.gov/agent/hydrofluoricacid/basics/facts.asp 57U.S. Chemical Safety and Hazard Investigation Board. “Factual Update: Fire and Explosions at Philadelphia Energy Solutions Refinery,” p. 10. 82Other alkylation technologies, such as ionic liquids alkylation technologies and solid acid catalysts, are under development and have the potential to serve as alternatives to HF or 58Ibid. sulfuric acid. However, these emerging technologies are not currently in widespread use 59U.S. Chemical Safety and Hazard Investigation Board. “Factual Update: Fire and Explosions in U.S. refineries. See Alkylation Technology Study – Final Report, Prepared by Norton at Philadelphia Energy Solutions Refinery,” p. 9. Engineering for the South Coast Air Quality Management District, Dated September 9, 2016. http://www.aqmd.gov/docs/default-source/permitting/alkylation-technology-study-final- 60 Philadelphia Energy Solutions. Industry Alert – HF Alkylation Corrosion. report.pdf. 61 U.S. Chemical Safety and Hazard Investigation Board. “Factual Update: Fire and Explosions 83Maykuth, Andrew. “’It looked like Armageddon’: Refinery fire puts focus on toxic at Philadelphia Energy Solutions Refinery,” p. 7. chemical.” The Philadelphia Inquirer, June 22, 2019. https://www.inquirer.com/news/ 62IMAAC Technical Operations Hub. “Potential Off-Site Hazard from Hydrogen Fluoride philadelphia-refinery-fire-explosion-cause-20190622.html Releases from PES Facility, 21 Jun 2019.” October 21, 2019. 84Centers for Disease Control and Prevention. Sulfuric Acid. https://www.cdc.gov/niosh/ 63Kearney, Laila and Jarrett Renshaw. “Philadelphia Energy Solutions files for bankruptcy after topics/sulfuric-acid/default.html refinery fire.” Reuters, July 22, 2019. https://www.reuters.com/article/us-pes-bankruptcy/ 85U.S. Chemical Safety and Hazard Investigation Board. “Factual Update: Fire and Explosions philadelphia-energy-solutions-files-for-bankruptcy-after-refinery-fire-idUSKCN1UH0O9 at Philadelphia Energy Solutions Refinery,” p. 1. 64 Maykuth, Andrew “Bankrupt Philly refinery gets interest from 15 potential bidders; aims 86U.S. Chemical Safety and Hazard Investigation Board. Letter from K.M. Kulinowski to for a January auction.” The Philadelphia Inquirer, November 10, 2019. https://www. EPA Administrator Andrew Wheeler, April 23, 2019. https://www.csb.gov/assets/1/6/ inquirer.com/business/bankrupt-philadelphia-energy-solutions-refinery-sets-sale-auction- letter_to_epa_4.23.2019.pdf procedure-20191110.html 87Maykuth, Andrew. “Deadly acid poses a safety issue for Sunoco,” The Philadelphia Inquirer, 65 U.S. Energy Information Administration. Crude-by-rail volumes to the East Coast are September 23, 2009. https://www.inquirer.com/philly/business/20090923_Deadly_ declining. August 3, 2016. https://www.eia.gov/todayinenergy/detail.php?id=27352 acid_poses_a_safety_issue_for_Sunoco.html 66 Simeone 26 88United Steelworkers. “A Risk Too Great: Hydrofluoric Acid in U.S. Refineries.” http://assets. 67Simeone 33. usw.org/resources/hse/pdf/A-Risk-Too-Great.pdf 68Maykuth, Andrew. “Philly refinery closure paves the way for pipeline settlement. 89Maykuth, Andrew. “’It looked like Armageddon’: Refinery fire puts focus on toxic Midwestern refiners win, for now.” The Philadelphia Inquirer, August 1, 2019, https:// chemical.” The Philadelphia Inquirer, June 22, 2019. https://www.inquirer.com/news/ www.inquirer.com/business/buckeye-laurel-gasoline-pipeline-will-allow-midwestern- philadelphia-refinery-fire-explosion-cause-20190622.html refinerst-ship-pennsylvania-20190801.html; Seltzer, Alan M. “Joint Petition for Approval of 90See Toxic Substances Control Act, 15 U.S.C. Sec. 2601 et. seq.; Occupational Safety and Settlement.” Pennsylvania Public Utility Commission, July 31, 2019. http://www.puc.state. Health Act, 29 U.S.C. Sec. 651 et. seq. pa.us//pcdocs/1630028.pdf 91Public Employees for Environmental Responsibility TSCA Sec. 21 Petition to Ban HF in 69 International Maritime Organization. Sulphur 2020 - Cutting Sulfur Oxide Emissions. Refineries, Dated August 7, 2019. https://www.epa.gov/sites/production/files/2019-08/ http://www.imo.org/en/MediaCentre/HotTopics/Pages/Sulphur-2020.aspx documents/hydrofluoric_acid_rulemaking_petition.pdf 70 Simeone 12 92See Philadelphia Code Sections 3-302(2)(a)-(d). 71 Jaramillo, Catalina. “Mixed review for a $120M renewable energy plant at Philly 93National Oceanographic and Atmospheric Administration. Sea Level Rise Viewer. https:// refinery.” WHYY/StateImpact, September 7, 2018. https://stateimpact.npr.org/ coast.noaa.gov/digitalcoast/tools/slr.html pennsylvania/2018/09/07/mixed-reviews-for-a-120m-renewable-energy-plant-at-philly- refinery/; Maykuth, Andrew. “Philly refiner plans $120M plant to convert food scraps to fuel for trucks and buses.” The Philadelphia Inquirer, August 28, 2018. https://www.inquirer. com/philly/business/energy/philadelphia-energy-solutions-food-waste-digester-methane- gas-fuel-20180828.html 72Hopkins, Phil. “Market Insights - PES Refinery Complex.” IHS MarkIt presentation to the Refinery Advisory Group, September 9, 2019. 73Philadelphia Code Section 14-602(5) 74Philadelphia Code Section 14-305. See also Metzger v. Bensalem Tp. Zoning Hearing Bd., 165 Pa. Cmwlth. 351 (1994). 75Philadelphia Code Section 14-305(5) 76Consent Order and Agreement By and Between PADEP, Sunoco, and PES, Dated August 14, 2012. 77Id. 78Philadelphia Industrial Development Corporation. “The Lower Schuylkill Master Plan: Executive Summary” https://www.pidcphila.com/images/uploads/resource_library/ LSMP_ExecSummary.pdf

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